Banks’ Liability Grows Over Foreclosure Errors

If five of the nation’s largest banks can’t reach a
settlement with state and federal regulators over shoddy foreclosure practices
soon, they stand to face at least $17 billion in civil lawsuits, The Wall Street
Journal reports.

The banks’ liability
could be even more. Banks also owe billions of dollar in possible claims to
federal agencies, such as the Justice department and Department of Housing and
Urban Development.

In over two months of
settlement talks, banks and state attorneys general and federal officials have
been unable to reach a settlement stemming from allegations of abuses in
mortgage services. Regulators first began investigations last fall into a
“robo-signing” scandal, in which banks were accused of approving thousands of
foreclosures on home owners without proper reviews.

So far, banks have proposed a $5 billion settlement, which would go
to compensate borrowers who faced errors in the foreclosure process as well as
provide transition assistance for home owners who were wrongly evicted from
their homes. However, federal and state officials have said that’s not enough;
some have asked banks for more than $20 billion.

Source: “Banks Face $17 Billion in Suits Over
Foreclosures,”
The Wall Street Journal
(May 25, 2011)

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