Banks Propose $5 Billion to Settle Foreclosure Claims!

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 practices.

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.

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

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