Banks' Liability Grows Over Foreclosure Errors

Daily Real Estate News May 25, 2011

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)