* Geithner says quick foreclosure deal 'very important'
* Remains to be seen if single deal can be struck-Walsh
* States have sent banks part of a proposed settlement
* BofA, JPMorgan, Citi, Wells, Ally among impacted banks
(Adds Elizabeth Warren comment in final paragraph)
By Dave Clarke and Rachelle Younglai
WASHINGTON, March 15 A comprehensive settlement
between U.S. authorities and banks over alleged mortgage
servicing abuses needs to be reached quickly to help the
housing market heal, Treasury Secretary Timothy Geithner said
Geithner said such a settlement will help dispel legal
uncertainty that has been plaguing mortgage lenders and
clogging the foreclosure process.
"It is very important that we try to bring this to bed as
quickly as we can," Geithner told the Senate Banking Committee.
"I think all parties, not just the servicers, but the state AGs
and the federal agencies have a strong stake in doing that."
A group of 50 state attorneys general and 12 federal
agencies are probing bank mortgage practices that burst into
public view last year, including the use of "robo-signers" to
sign hundreds of unread foreclosure documents a day.
The negotiators are struggling to reach a single agreement
on financial penalties and higher standards for banks handling
troubled home loans.
A "global" settlement with the authorities would relieve a
potentially large legal liability and reputational black eye
for the banks, as they could face numerous lawsuits and fines
without a universal agreement.
Geithner declined to discuss details of the talks.
Negotiations have focused on the top U.S. mortgage
servicers, including Bank of America Corp (BAC.N), JPMorgan
Chase & Co (JPM.N), Citigroup Inc (C.N), Wells Fargo & Co
(WFC.N) and Ally Financial.
Democratic Senator Jack Reed said the banks are facing a
massive legal threat unless a comprehensive deal is reached. He
cited the potential for numerous suits from state AGs,
repurchase demands from bondholders who invested in billions of
dollars in mortgage-backed securities, and lawsuits from
"This would have, I would assume, a very deleterious effect
in the marketplace and the standing of the companies that
you're talking to right now," Reed told Geithner.
Many housing experts say home prices cannot recover as long
as buyers believe a backlog of foreclosed properties remains
poised to come on to the market.
Foreclosure tracker RealtyTrac reported that foreclosures
in February were down 27 percent from the same month last year,
bringing foreclosure activity to a 36-month low.
The report attributed a hefty portion of the decline to
court rulings challenging banks' documentation, which have led
banks to hold back on filing foreclosure cases.
CHANCES FOR GLOBAL DEAL UNCERTAIN
John Walsh, a top bank regulator, said earlier on Tuesday
that U.S. federal and state authorities still hope to reach a
single settlement proposal they can present to the banks over
"We each have our own separate responsibilities and areas
of jurisdiction, but to the extent possible we are trying to
coordinate our actions," Walsh, acting head of the Office of
the Comptroller of the Currency, told an American Bankers
Association conference. "Whether this is possible remains to be
On March 3, state attorneys general sent banks aspects of a
proposed settlement endorsed by some federal agencies but not
the OCC or the Federal Reserve, the main banking regulators
involved in the discussions.
The 27-page document proposed changes to how the mortgage
servicing industry operates and advocated reducing loan
balances for struggling borrowers as a way to help them avoid
foreclosure, a proposal banks have not supported in the past.
State and federal authorities continue to negotiate over
the key aspect of any settlement: what fine or penalty banks
will have to pay.
At least some of the officials who endorsed the proposal
sent out earlier this month have been pushing for a fine of
about $20 billion, which would be used in part to help
Iowa Attorney General Tom Miller, who is leading the
states' probe of mortgage servicing problems, said last week
that he hoped to have a settlement with the nation's biggest
banks in the next two months.
Critics of the disjointed settlement negotiations,
including a group of House of Representatives Republicans, have
argued the early proposal is an abuse of power that could harm
financial markets. [ID:nN0999111]
Questions have been also been raised about whether the new
Consumer Financial Protection Bureau is playing too large a
role in settlement negotiations, especially in pushing for
principal writedowns in troubled mortgages, because it won't
assume its formal regulatory powers until July.
Elizabeth Warren, the special advisor setting up the
consumer agency, warned on Tuesday against politicizing the
probe. "Political attacks against federal and state law
enforcement officials for responding to alleged legal
violations are dangerous," she said in a statement released to
(Reporting by Dave Clarke and Rachelle Younglai; Editing by
Dave Zimmerman and Tim Dobbyn)