Demonstrators protest corporate tax cuts vs. governmental budget cuts to education, health care and the environment outside a Bank Of America in the Hollywood section of Los Angeles on April 18, 2011. UPI/Jim Ruymen |
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NEW YORK, Sept. 6 (UPI) -- U.S. banks are balking at an offer by state officials to limit their blame for alleged improper mortgage practices in return for a multibillion-dollar payment.
Mortgage giants Bank of America Corp., J.P. Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. say the latest attorneys general proposal over so-called robo-signing and other sloppy mortgage practices is a "non-starter" because it does not release the banks from all future liability for past mortgage practices and mortgage-backed securities they sold to investors, people with direct knowledge of the discussions told the Financial Times.
Robo-signing involves employees signing foreclosure documents en masse without reviewing them, as required by law. The documents are used to prove banks have a right to foreclose if a homeowner isn't making mortgage payments.
The banks alleged they were so overwhelmed with paperwork that they cut corners.
The scandal led the five big lenders in negotiations with attorneys general to temporarily halt foreclosures nationwide last fall.
The banks' all-encompassing immunity demand comes as some attorneys general express concern the negotiations, involving a proposed total $20 billion to $25 billion penalty payment, already offer the banks far too broad a release from liability, the Financial Times said.
The talks, which resume this week, include discussions about releasing the banks from legal liability for wrongful securitization practices.
Securitization involves pooling unrelated residential and commercial mortgages, and sometimes adding pooled auto loans and credit-card debt, and selling the debt as bonds and other securities to investors. The practice produced billions of dollars of profits for banks but eventual investor losses in the tens of billions.
The attorneys general of New York, Delaware, Massachusetts and Nevada are probing such securitization matters and have told the 46 other states in the talks they don't agree with this part of the proposal, the newspaper said.
They say the proposal seeks to resolve allegations that have not been fully investigated, the newspaper said.
Other state officials counter that cleaning the slate with banks can heal the deteriorating housing market and secure fresh debt relief for distressed homeowners.
