Banks are offering a $19 billion-plus settlement over alleged foreclosure abuses in exchange for a surrender of the rights to sue over certain flawed mortgage originations by the Consumer Financial Protection Bureau.
The nation’s five largest mortgage banks, state attorneys general and the Obama administration are working to reach a deal before the end of the year, WSJ.com reports. State and federal officials, however, are reluctant to provide legal releases of claims over mortgages that were filed before the bureau was created.
The negotiations center on the use of “robo-signing,” which employees from Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. used to approve documents without adequate review.
In October, a group of state attorneys general said they would surrender certain claims related to mortgage originations in exchange for a new offer from the banks that they would allow refinancing by more underwater borrowers, according to WSJ.com. In the interim, the administration and banks have been compromising on releases over loans insured by the Federal Housing Administration.
The CFPB’s authority over faulty mortgage-servicing operations is unclear because banks are operating under consent orders issued in April by the Office of the Comptroller of the Currency as well as the Federal Reserve.
The National Consumer Law Center, a consumer advocacy group, is encouraging Congress to transfer the entire regulatory review for foreclosure remediation process to the bureau.