Foreclosure deal slowed by infighting: sources

CHARLOTTE, N.C./WASHINGTON Fri Feb 25, 2011 7:15am EST

A ''For Sale- Bank Owned'' sign sits in front of a home in Michigan, June 19, 2009. REUTERS/Rebecca Cook

A ''For Sale- Bank Owned'' sign sits in front of a home in Michigan, June 19, 2009.

Credit: Reuters/Rebecca Cook

CHARLOTTE, N.C./WASHINGTON (Reuters) - Regulators' efforts to settle with banks over improper mortgage foreclosures are being hampered by disagreements among the groups involved over the size and shape of an accord, according to sources familiar with the matter.

Banking regulators and a coalition of state attorneys general are trying to forge a settlement with the largest banks, which have been accused of foreclosing on borrowers without having the necessary paperwork in place.

A settlement would relieve a potentially large legal liability and reputational black eye for the banks, as they could face a myriad of lawsuits and fines without a universal agreement.

Sources familiar with the talks say the various groups disagree on the parameters of a settlement, with bank regulators pushing to outline a settlement plan as soon as mid-March.

Analysts said the discussions highlight the difficulties of reaching a universal settlement as disparate groups are involved in the negotiations.

"It is herding cats, there's no question about it, and they are not always the most agreeably tempered cats," said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a firm that advises on regulatory policy.

For example, the members of the Treasury team setting up the new Consumer Financial Protection Bureau, along with the Federal Deposit Insurance Corp, have been pushing for a larger financial settlement than the Office of the Comptroller of the Currency, the sources said.

The Federal Reserve appears to be somewhere in the middle and has not backed the OCC's approach, as regulators continue to focus on the size of the penalty for improper foreclosures.

Spokesmen for several of the federal agencies involved in the talks were not immediately available for comment.

Department of Housing and Urban Development spokeswoman Melanie Roussell and OCC spokesman Bob Garsson declined to comment.

Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, said on Wednesday that the attorneys general were "approaching a very sensitive time of negotiations."

Miller is spearheading the 50-state attorneys general probe into mortgage lenders' foreclosure practices.

"There are a number of federal agencies involved here, and not all agencies have the same ideas of where they should go," Greenwood said, adding that it "may not be accurate" that any universal settlement would apply the same language to all parties, including the attorneys general.

He declined to comment on what specific remedies the attorneys general coalition would seek, or the status of the group's investigation.

One proposal being pushed by negotiators looking for the biggest settlement, such as the incoming consumer agency, would have the attorneys general and federal agencies signing off on what would amount to about a $20 billion settlement, according to a source familiar with the matter.

That number was first reported by The Wall Street Journal on Tuesday.

There is, however, no agreement on that figure among all regulators involved who continue to debate the issue.

Another question regulators are wrestling with is whether and how much of the settlement should go toward helping struggling homeowners.

The homeowners' aid could be either principal forgiveness for qualifying borrowers or loan modifications, the source said. But how to structure the plan so banks would have to follow it is another challenge.

It is unclear how much aid any agreement would provide to consumers, particularly as some lawmakers are seeking to repeal existing aid programs.

On Thursday, House Republicans said the House Financial Services Committee would vote on a bill on March 3 that would end the Home Affordable Modification Program, the Obama administration's key foreclosure rescue program.

Last fall, the biggest mortgage lenders -- including Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Ally Financial Inc's GMAC Mortgage -- temporarily halted or refiled paperwork on foreclosures nationwide.

The attorneys general probe into the matter began soon after, and the Securities and Exchange Commission, the Department of Justice and bank regulators have opened their own inquiries.

(Additional reporting by Scot Paltrow, Corbett Daly and Rachelle Younglai in Washington and Dan Levine in San Francisco; editing by John Wallace, Gerald E. McCormick and Matthew Lewis)

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Comments (1)
O.k. lets review then: In the American version of the economic collapse 100s of billions of dollars were given to the very people who, through their reckless avarice and socio-pathic disregard for human suffering, caused the financial system to implode like the WTC. Then instead of giving back to the very system that saved them from oblivion they paid obscene bonuses to the little lackeys who manipulated this disaster in the first place.
Now the AGs in 50 US states are negotiating with them to “agree on the terms of a settlement.”!! Knowingly falsifying financial &/or court documents would land the ave. person in prison with hefty fine. Yet there is no mention of anyone of the myriad of cretins who are responsible for this criminal enterprise going to prison.
Why the hell not he asked rhetorically? Because everyone involved in the scheme knows that to indite one stinking person would begin to bring down the entire charade that is the world banking system.
Remember only 3% of the entire monetary machine exists in actual hard currency. The remaining 97% is electronic & therefore an illusion. Forget the inane self congratulatory award show called the Oscars, if you want to watch and learn something I urge everyone to buy a copy of “The Inside Job” narrated by Matt Damon. This documentary explains quite simply how the banks cooperated with Wall St. con men to destroy middle class hopes of ever daring to dream of earning a larger share of the so called pie. The Media machine will tell you 100s of millions of people watched this obscene parade. Ask your selves how many of those people are sitting in motels or were made homeless by the real dream factory? So this is what democracy looks like eh? Pass the popcorn… .

Feb 25, 2011 3:43pm EST  --  Report as abuse
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