Mortgage Lenders Offer States New Terms for Draft Settlement over Mass Foreclosures

(Fox News) - WASHINGTON -- The nation's five largest mortgage lenders have offered a draft settlement to pay out as much as $25 billion to cover new terms for homeowners driven out by foreclosure, but government officials said Monday the states won't be able to close the deal before President Obama's State of the Union address Tuesday.

The banking industry offer includes changes in foreclosure practices, which is a major goal of the Obama administration in the talks. But some states have resisted before, and Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who is leading the talks, said his counterparts are "just meeting to talk about proposed terms" and don't expect an announcement this week.

A Housing and Urban Development spokesman said that "negotiations are still ongoing ... we hope to announce something soon." The spokesman said remarks from Housing Secretary Shaun Donovan last week -- in which he said the lenders and states were "very close" to an arrangement that would help up to one million homeowners modify mortgages -- "still stand."

According to the terms offered by the banks, those who lost their homes to foreclosure are unlikely to get them back or benefit much financially from the settlement. But about 750,000 Americans -- roughly half of the households who might be eligible for assistance under the deal -- will likely receive checks for about $1,800.

Roughly one million homeowners could see the size of the mortgage reduced by an average of $20,000.

Two sources familiar with the negotiations said the settlement could even reach $35 billion with the additional participation of about 10 smaller, regional banks.

The agreement could also reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans.

The five major banks -- Bank of America, J.P. Morgan Chase, Wells Fargo, Citibank and Ally Financial -- would apply the settlement only to privately held mortgages issued between 2008 and 2011.

Trying to change Fannie and Freddie's programs would be extremely complicated and there is a risk it could cost taxpayers more bailout money if not structured correctly.

Obama is likely to mention the proposals during his State of the Union address in an effort to push the talks, which started more than a year ago, to conclusion. But a top bank lobbyist said the deal won't be reached in time for the president to make an announcement at the annual address to Congress.