WASHINGTON - November 16, 2010 – All 50 state attorneys general are in negotiations over an agreement over foreclosures that would include a victims’ compensation fund that would provide money for borrowers whose homes have been taken away improperly, according to state and industry officials.

The discussions are still preliminary and the final deal may change significantly as details are hammered out and the settlement is vetted by 50 separate state offices, the official said.

While there's no universal agreement that would apply industry wide and the AGs are negotiating separately with each bank, many of the stipulations are the same for the agreements being discussed with the three largest mortgage servicers: Bank of America, JP Morgan Chase and Wells Fargo.

Both sides have tentatively agreed that mandatory third-party mediation if a homeowner requests it is something that should be included. They also agree that there should be no more "dual track" loan modification negotiations that end suddenly with foreclosures. Many homeowners have complained that they were in the middle of loan modification discussions when they were foreclosed on or told to default on their loans to get a modification, and then ended up having their home foreclosed.

The most radical part of the settlement deal has to do with providing monetary compensation to homeowners who have lost their homes but can prove they have been wrongly foreclosed. This is the most contentious item because the amount of the funds that would be available for such compensation has not been worked out yet, and it's also unclear how the funds would be administered.

The big banks have said they either don't know of any cases in which someone’s home was improperly foreclosed or that the number of cases is small, but homeowner advocates say wrongful foreclosures are widespread.