By Kevin Chiu
Almost a year after the robo-signing scandal made headlines, shedding light on the magnitude of the foreclosure crisis for the U.S. economy, the 50 states Attorney Generals negotiations attempting to reach a settlement with banks have hit a halt.
The stop in talks between bankers and the states top law enforcement prosecutors was hit after attorneys representing bankers refused to give in over requiring broad legal immunity from state prosecutors for mortgage related lawsuits.
Officials from the Obama administration and states are seeking penalties between $20 and $25 billion from Bank of America, JP Morgan Chase & Co., Ally Financial and other mortgage lenders being investigated by authorities.
Bankers are insisting on a deal that would free them of further legal disputes and costs associated with the robo-signing scandal, in which employees of companies affiliated with the banks and a division of Lenders Processing Services (LPS) admitted to forging tens of thousands of documents to legally enforce foreclosures against homeowners.
The scandal has evolved into a massive series of lawsuits filed by homeowners and former homeowners who blamed their lenders for “illegally” foreclosing on their homes.
In a conference call with investors, Bank of America CEO Brian Moynihan said the bank would rather litigate each individual case before agreeing to a blanket agreement.
BofA will need to raise billions of dollars from its other assets to cover losses associated with foreclosures from mortgages it purchased from defunct Countrywide Mortgage.
The halt in negotiations comes just days after officials for Ally Financial, which formerly did business as GMAC Mortgage warned investors of a probable monetary fine from the 50 state attorneys investigation that would be a sizeable amount. However, Ally officials would not disclose an amount they expected to be forced to pay as a result of any agreement.
Investigators are attempting to determine how widespread the forgeries on affidavits had been during the foreclosure proceedings in 26 states, which require court approval before foreclosures are able to proceed. But employees formerly associated with LPS said they had signed hundreds of thousands of affidavits in other persons’ names for the firm.
Iowa Attorney General Tom Miller is heading up the investigation, but has had little to publicly say about the matter in recent months. At least three state Attorney Generals, including Massachusetts say they will not agree to a settlement that excuses liability for Mortgage Electronic Registration Systems (MERS) as part of the agreement.