* JPM, BofA and Wells Fargo partially settle NY lawsuit
* Citi, Ally Financial also part of $25 mln deal
* Banks did not admit any wrongdoing
* NY state warns of future lawsuits
By Basil Katz and Karen Freifeld
NEW YORK, March 14 Five major U.S. banks
have agreed to pay $25 million to New York State over their use
of an electronic mortgage database that the state said resulted
in deceptive and illegal practices that led to more
than 13,000 foreclosures.
JPMorgan Chase & Co, Bank of America Corp
and Wells Fargo & Co each agreed to pay $5.9 million in
order to partially settle a lawsuit over their use of the
Mortgage Electronic Registration System (MERS),
Two other banks, Citigroup Inc and Ally Financial, also
agreed to pay $5.9 million and $1.25 million respectively
although they were not named in the Feb. 3 lawsuit.
It was not immediately clear why Citi and Ally opted to
participate in the settlement, although they are in the process
of settling other similar claims.
All five banks in February reached a settlement with 49
states and federal agencies to pay $25 billion to resolve
government lawsuits over faulty foreclosures and the handling of
requests for loan modification.
In the New York settlement in February, none of the banks
admitted nor denied the MERS allegations, the agreement said, a
copy of which was obtained by Reuters on Tuesday.
MERS is an electronic database created in the mid-1990s for
tracking mortgage ownership. New York State Attorney General
Eric Schneiderman said in his lawsuit that the system was
plagued by inaccuracies.
In exchange for the $25 million, New York State has agreed
to drop some specific MERS claims. The state will use the money
to address housing issues, such as mortgage defaults and
foreclosures and further investigation and prosecutions.
Citigroup, JPMorgan and Ally declined to comment on the
settlement, while spokespeople at the other two banks were not
Other allegations in the New York lawsuit have not been
resolved and the state said it will still pursue claims for
damages incurred by New York borrowers and homeowners.
"We intend to aggressively litigate this case to finally
prohibit the widespread illegal and deceptive practices of the
banks set forth in our complaint," Danny Kanner, a spokesman for
Schneiderman, said in an email on Tuesday.
"The significant sum of $25 million obtained by this office
does absolutely nothing to limit the aggressive posture we will
continue to take to protect homeowners and borrowers."
The lawsuit said the use of MERS resulted in the filing of
improper NY foreclosures and created "confusion and uncertainty"
over property ownership interests.
Over 70 million mortgage loans, including millions of
subprime loans, have been registered in the MERS system, rather
than in local county clerks' offices, according to the lawsuit.
Nearly 11 million Americans owe more than their homes than
they are worth, after home values fell 33 percent from a 2006
peak fueled by generous loans, often to people with dubious
The earlier $25 billion housing settlement gives President
Barack Obama, as he seeks re-election in November, a chance to
show he is willing to get tough with big banks to help ordinary
Americans survive the pain of the nation's foreclosure crisis.
The deal, to be spread out over three years, requires the
banks to cut mortgage debt amounts and extend $2,000 payments to
borrowers who lost their homes to foreclosure.
But the banks still face a host of other potential
government enforcement actions and investor lawsuits related to
their packaging of home loans into securities, and other
In January, Obama announced the creation of a new working
group to coordinate inquiries into abusive home-loan lending and
the pooling of risky mortgages that sparked the housing crisis.
Schneiderman was tapped to help lead the group.