Banks Propose $5 Billion to Settle Foreclosure

In negotiation talks with state and
federal officials, the nation’s largest banks said they are willing to pay $5
billion to settle an ongoing probe into claims of faulty foreclosure

Bank of America Corp., JPMorgan
Chase & Co., CitiGroup Inc., Wells Fargo & Co., and Ally Financial Inc.
made the offer during negotiation talks this week with state attorneys general
and federal officials. The five bank giants service more than half of mortgages
in the country.

The ongoing settlement
talks stem from an investigation into banks’ foreclosure practices, which
revealed last fall a “robo-signing” scandal in which thousands of foreclosures
were approved without proper reviews.

Since then, state attorneys general, along with other government
agencies, have worked to change banks’ foreclosure procedures and penalize banks
for shoddy practices.

The $5 billion
offer from banks comes at time when state attorneys general are pressing banks
to agree to a special fund that would cover principal write-downs for struggling
home owners, a proposal that banks have strongly opposed. The banks argue that
any plan that would reduce borrowers’ loan balances would just encourage more
home owners to default.

“Banks Said to Offer $5 Billion to Resolve
Probe of Foreclosures,”
Bloomberg (May
11, 2011)