Tags: us | Banks | Mortgage | Deal

US Contacting Additional Banks on Mortgage Deal

Tuesday, 10 Jan 2012 11:07 AM

 

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As the government nears a deal with top U.S. banks to resolve mortgage abuses, the Justice Department has begun reaching out to other banks to gauge their interest in joining the wide-ranging settlement, according to a person familiar with the matter.

The DOJ has contacted several nationally chartered banks to determine whether they might agree to terms similar to those in the proposed deal, the person said.

State and federal officials are nearing a settlement with the five largest mortgage servicers — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. — to resolve allegations of misconduct in processing foreclosures and other issues.

In exchange for between $20 billion to $25 billion in relief to distressed homeowners, the banks will put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing the loans.

In recent weeks Justice officials have approached several other banks about joining the settlement, a move that could potentially push up the total price tag.

The additional banks are expected to include those that entered into consent orders last year with U.S. bank regulators over similar allegations.

That group includes HSBC Holdings Plc PNC Financial Services Group Inc., MetLife Inc., SunTrust Bank, U.S. Bancorp, OneWest Bank, Sovereign Bank and Aurora Bank.

A settlement that goes beyond the five largest servicers might add around $5 billion or less to a total settlement, according to estimates from Inside Mortgage Finance's publisher Guy Cecala, but it could reach a wider pool of borrowers.

"Clearly it was not just five lenders committing robo-signing," he said. "It was a widespread practice."

Negotiators have long said they planned to go beyond the top five servicers, but the recent contact signals they are at an advanced stage in the talks.

While the contours of the deal are set, some of the fine print, including which claims are released and who will monitor the enforcement of the settlement, is still being hashed out.

LONG TIME IN THE MAKING

The talks, which began more than a year ago after reports emerged that banks had robo-signed documents and rushed through paperwork to deal with a flood of foreclosures, included both regulatory and enforcement agencies aimed at striking a global settlement.

But regulators at the Office of the Comptroller of the Currency and the Federal Reserve moved forward on their own last April, when 14 servicers signed consent orders, agreeing to review past foreclosures and reform their servicing practices.

While the enforcement agencies involved in the ongoing talks expected to eventually resolve cases against all 14, they focused on the largest five initially.

A person familiar with the matter said it was unlikely the smaller banks would sign on in time for an announcement, which could come in the next several weeks, but could join soon after.

Representatives of the banks either declined to comment or did not respond to a request for comment. A spokeswoman for the Justice Department declined comment.

In a November securities filing, HSBC said it expected that the next nine largest servicers, including HSBC Bank USA and HSBC Finance, would be approached about a settlement after the five largest servicers concluded their talks and announced an agreement.

The bank has ongoing discussions with regulators and government agencies on mortgage servicing matters but those discussions are confidential, HSBC spokesman Neil Brazil said.

In its most recent quarterly securities filing, PNC said regulatory inquiries related to foreclosure practices were ongoing and might result in additional "actions, penalties or other remedies."

The volume of the total settlement has fluctuated based on who and what is in the final deal.

The attorney general in California pulled out of the talks in September and said the deal under consideration failed to provide enough relief to the state's homeowners and released the banks from too many claims.

Negotiators have moved forward on a scaled-back deal without the state.

© 2014 Thomson/Reuters. All rights reserved.

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