Why are States Offering Big Banks Immunity from Foreclosure Lawsuits?
Despite emerging evidence that banks (NYSE:KBE) are continuing questionable foreclosure practices, a coalition of 50 states’ attorneys general is negotiating settlements with five of the nation’s largest banks that would grant them immunity over previously mishandled foreclosures.
The settlements would require banks to make a commitment to adhere to new rules and foreclosure guidelines, as well as pay up to $25 billion in penalties. In turn, they would be granted immunity from further prosecution by the U.S. Department of Justice or the Department of Housing and Urban Development, as well as any civil lawsuits by the states. Officials haven’t spoken as to whether immunity from criminal prosecution would also be granted under the terms of the deal. The banks involved in the talks are Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), CitiGroup (NYSE:C), JPMorgan Chase (NYSE:JPM), and Ally Financial.
Many top mortgage lenders have already signed similar settlements with federal bank regulators, promising to discontinue certain practices and give remediation to affected homeowners (NYSE:IYR). However, many of those same financial institutions continue the practices that got them in trouble in the first place, and that contributed to the nation’s financial crisis.
Probably the most publicly visible objector to a deal that would grant wide-ranging immunity to corrupt banks is New York State Attorney General Eric Schneiderman, who has launched his own investigations into top banks, particularly looking at mortgage securitization practices. According to a spokesman for Schneiderman’s office, “Attorney General Schneiderman remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.”
Attorneys general from Iowa, Illinois, and Connecticut are in charge of current immunity negotiations with the banks (NYSE:KBE). While the extent of the immunity or the dollar amount of any penalties has yet to be decided upon, negotiations continue to progress, though spokesmen from the offices of the three attorneys general designated to the negotiations have declined to comment.