Big U.S. banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal that is proposed to limit part of their legal liability in return for a multibillion dollar payment.
The talks aim to settle allegations that banks including Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial seized the homes of delinquent borrowers and broke state laws by employing so-called “robosigners”, workers who signed off on foreclosure documents en masse without reviewing the paperwork.
According to five people with direct knowledge of the discussions, state prosecutors have proposed settlement language in the “robosigning” case that also might release the companies from legal liability for wrongful securitization practices.
Some state officials have expressed concern that they have offered the banks far too broad a release from liability. Others say the broad language was perhaps inadvertently crafted and will be tightened as negotiations continue. Participants on both sides stressed the talks remain fluid.
However, the banks – some of whose share prices have been battered by concern about their exposure to mortgage-related litigation – are pressing for immunity from a raft of alleged civil violations and have called the latest proposal a “non-starter”.
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