State AGs seek settlement over botched foreclosures

2012-09-09T00:00:00Z State AGs seek settlement over botched foreclosuresCarter Dougherty and Cheyenne Hopkins Bloomberg News Arizona Daily Star

WASHINGTON - State attorneys general are pressing four banks to accept a legal settlement over botched foreclosures similar to a deal reached with larger competitors this year.

U.S. Bancorp, PNC Financial Services Group, SunTrust Banks and HSBC Holdings have held talks with state and federal officials who investigated claims that loan servicers mishandled foreclosure documents.

Neil Brazil, a spokesman for HSBC's North America unit, said in an email that the London-based lender has conducted "preliminary discussions with its bank regulators and other governmental agencies" and that "the timing of any settlement is not presently known."

State attorneys general led by Tom Miller, a Democrat from Iowa, began an investigation of mortgage servicers in October 2010 after reports that practices including "robo-signing" had led to improper foreclosures. The probe led to a settlement in February among the five biggest servicers - JPMorgan Chase, Citigroup, Wells Fargo Bank of America and Ally Financial - and 49 states and the federal government.

Michael McCoy, a spokesman for Atlanta-based SunTrust, declined to comment, as did Frederick Solomon, a spokesman for Pittsburgh-based PNC and Tom Joyce, a spokesman for Minneapolis-based U.S. Bancorp.

The effects of the housing market collapse continue to be felt by these and other banks, not only on mortgage servicing.

SunTrust said Friday that it would set aside $375 million to repurchase faulty loans it may have originated, following PNC, which set aside $350 million in June.

The deal with the five largest mortgage servicers is valued at $25 billion, including $5 billion in payments to states, including Arizona, and $20 billion that banks will use to compensate borrowers who lost their homes to foreclosures, forgive debt, give payment forbearances, arrange short sales and refinance mortgages at lower rates.

The deal also specified new standards for fair servicing of mortgages.

In return, the banks received limited protection from state litigation.

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