Bank of America Corp., JPMorgan Chase & Co. and three other U.S. mortgage servicers are in advanced talks to resolve state and federal claims over faulty foreclosures, according to two people briefed on the matter.
Negotiators tentatively set a July 13 target for a settlement, which may exceed $20 billion, the people said, speaking on the condition of anonymity because the talks are private. Some banks are briefing their boards on deal terms, which would form state and federal funds to resolve claims and provide relief to borrowers, they said. The target date may be postponed as parties iron out details.
Attorneys general and federal officials are negotiating with the group of lenders -- also including Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. -- to resolve probes into how banks treated borrowers during a surge in mortgage defaults. A final agreement, setting standards for servicing loans and processing foreclosures, may serve as a template for claims against the rest of the industry.
The July 13 target corresponds with a separate deadline the Office of the Comptroller of the Currency set for banks to submit plans for fixing deficiencies and compensating people whose homes were improperly seized. If talks aren’t done by then, the OCC may push back its date, the people said.
“We are trying to integrate our settlement with the OCC action plan,” said Geoff Greenwood, spokesman for Iowa Attorney General Tom Miller, without commenting on the July 13 date. “The action plan does not involve us, but we’re trying to work together.”
Miller is leading the negotiations on the states’ behalf.
Relief for Borrowers
The proposed accord would require banks to set up a fund for states to resolve civil mortgage complaints as well as a separate federal account that would require them to provide a specified amount of mortgage relief to borrowers, two people said. Banks could get credit toward their relief obligation if they write down principal and modify loans in their portfolio, one of the people said. The exact mechanism to determine and award credits is still being discussed, the person said.
The New York Post sent bank stocks lower yesterday after reporting that the settlement’s total value might reach $60 billion, citing unidentified people close to the discussions. The Post corrected its report today, saying the amount might reach $25 billion.
Bank of America, which fell 2.4 percent yesterday, rose 18 cents, or 1.7 percent, to close at $10.92 in New York Stock Exchange composite trading. JPMorgan, which declined by 1.2 percent yesterday, advanced 1.9 percent to $41.32. Wells Fargo, which dropped 1.1 percent yesterday, added 1.9 percent today to $28.66.
Spokesmen for Charlotte, North Carolina-based Bank of America, San Francisco-based Wells Fargo, Detroit-based Ally and New York-based Citigroup and JPMorgan said they couldn’t comment. A spokesman for the OCC didn’t return phone calls seeking comment yesterday.
Attorneys general from all 50 states announced an investigation last year following claims of faulty foreclosure practices by banks. At a May 24 meeting, state legal officers told the banks they will face an estimated $17 billion in claims if the inquiries result in civil lawsuits.