Big Banks Balk at These Foreclosure Settlement Terms
Settlement discussions that could have the nation’s biggest banks (NYSE:KBE) paying as much as $25 billion in fines are in jeopardy, with just a few banks holding out against some of the key terms put forth by state attorneys general and federal regulators, who have been working on the settlement for months. One main area of contention is whether banks paying fines for their handling of faulty foreclosures should be released from any future liabilities.
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Banks such as Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C) and Ally Financial are hoping for a settlement that will put an end to the “robo-signing” scandal and other foreclosure lapses, and state attorneys and regulators are hoping to put the issue behind them as well, but each side has been adamant about their terms. So a new plan could emerge that has each state seeking an individual settlement, or forming smaller alliances, rather than going for the large, group effort that would tackle all the major banks at once. However, banks are unlikely to agree to smaller deals, because they are eager to have the whole matter settled and in the past.
Mortgage losses and litigation have taken a large toll on banks’ financials of late, and a large settlement that closes the possibility of any further litigation on the matter would allow banks to focus on moving forward. But some attorneys have been opposed to any agreement calling for the reduction of the principal for “underwater” homeowners, which would have banks losing even more money, thus holding up negotiations. The measure has been supported by state attorneys Pam Bondi of Florida, Kenneth Cuccinelli of Virginia, Greg Abbott of Texas, and Alan Wilson of South Carolina.
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Attorneys general from Massachusetts and New York have opposed a plan releasing banks from future liability. New York AG Eric Schneiderman, who has been at the forefront of investigations into mortgage fraud since he took office in January, is currently challenging a separate $8.5 billion settlement between Bank of America (NYSE:BAC) and 22 large institutional investors related to losses incurred through purchases of soured mortgage-backed securities.