Two big regional U.S. banks on Wednesday disclosed they had set aside funds related to mortgage servicing matters, a sign that lenders beyond the five largest mortgage servicers may join a possible settlement to resolve allegations of mortgage abuses.
The disclosures by US Bancorp and PNC came as a lead negotiator of the settlement talks, U.S. Housing and Urban Development Secretary Shaun Donovan, said settlement discussions were "very close" to concluding.
The settlement, in which servicers are expected to provide $20 billion to $25 billion in relief for troubled borrowers, could benefit about one million homeowners, Donovan said.
In exchange, the banks will not face government lawsuits about improper foreclosures and abuses in originating and servicing the loans.
PNC Financial Services Group Inc and US Bancorp reported a total of $370 million in mortgage-related expenses as part of their fourth-quarter results.
The banks are among 14 mortgage servicers who have been ordered by regulators to improve their servicing operations.
PNC recorded $240 million in foreclosure-related expenses as a result of "ongoing governmental matters," while US Bancorp took a $130 million charge due to mortgage servicing matters.
Several top U.S. banks -- Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and Ally Financial Inc -- are expected to sign an agreement with the government in the coming weeks to resolve allegations of mortgage abuses, including "robo-signing" of foreclosure documents.
People familiar with the matter told Reuters earlier this month that the Justice Department had begun reaching out to several other banks to gauge their interest in joining the settlement, a move that could increase the price tag of the deal.
In a conference call with analysts, PNC Chief Executive James Rohr said the bank had recently been contacted by "additional regulators who gave us some information that we believed that we needed to accrue for in the fourth quarter."
US Bancorp CEO Richard Davis said it is "accurate that banks beyond the big five have been invited into the conversations, and for that we believe we have something that we need to reserve for."
Davis said the fact that the bank was setting aside reserves did not necessarily mean a final decision had been made or that a final amount had been determined.
(Reporting By Rick Rothacker in Charlotte and Margaret Chadbourn and Aruna Viswanatha in Washington; editing by John Wallace)