Bank of America Close to Side Deal Over Mortgage Fraud
Bank of America is engaged in negotiations with federal and state prosecutors to reach a settlement for a wide array of mortgage abuses committed by the bank. The negotiations are based around a plan to forgive the bank's fraud in exchange for fines that would be used to finance a significantly expanded relief program for homeowners in jeopardy of losing their homes.
The talks are separate from ongoing talks between the nation's five largest mortgage servicers and the Department of Justice, Department of Housing and Urban Development and the attorneys general from all 50 states. Those talks are designed to resolve allegations of improper foreclosure processing, including the infamous "robo-signing" scandal, in exchange for reduced payments and principals for millions of troubled borrowers.
The talks involving Bank of America alone, however, go beyond the options being discussed in the larger case. The Department of Justice, together with a small group of state legal officers, wants an agreement that would forgive a significant amount of mortgage principal owed by troubled borrowers in exchange for immunity from prosecution for the alleged improprieties. Only a handful of states are involved in the side deal with Bank of America. Other banks, including JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial, are also engaged in talks over side deals, but none of those talks are in such an advanced stage.
When an agreement is reached with Bank of America, that settlement could be used as a template in talks with the other four banks. Prosecutors are proceeding on the assumption that a deal with BAC could encourage the other banks to settle or risk prosecution.
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