Sheila Bair Said to Be Top Pick for Foreclosure Accord Monitor

Ex-Federal Deposit Insurance Corp. Chairman Sheila Bair is a top candidate among state officials to ensure banks comply with any settlement of a nationwide foreclosure probe, a person familiar with the matter said.

Bair, who led the FDIC from 2006 until this year, is supported by some states as a third-party monitor of any accord with mortgage servicers including Bank of America Corp., though Citigroup Inc. opposes her selection, said the person. Selection of a monitor is one of the final issues to be worked out between the banks and state and federal officials, said the person and one other also familiar with the talks. Both declined to be identified because the negotiations are secret.

Bair, 57, now a senior adviser to the Pew Charitable Trusts, was approached about the job two months ago and turned it down, according to a third person who is familiar with the matter. She declined in part because of a book manuscript she is writing that is due in a few months, said the person, who asked not to be identified because the inquiry was private.

All 50 states last year said they were investigating bank foreclosure practices following disclosures that the companies were using faulty documents in seizing homes. State and federal officials leading the talks are seeking an agreement that provides mortgage relief to homeowners and sets standards for foreclosure practices.

The monitor would ensure compliance with any agreement, according to a settlement proposal offered to the banks in March.

Records, Penalties

The position will include authority to access records and audit a servicer’s performance, according to the document. Banks would be subject to penalties for failure to meet performance measures and timelines.

Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, declined to comment on who is being considered for the monitor position. Miller is leading the talks for the states. Sarah Holt, a representative of Philadelphia-based Pew, declined to immediately comment on the position.

Both sides in the settlement negotiations have agreed to the framework of a deal, according to the two people familiar with the talks. The accord with the five largest mortgage servicers could amount to $25 billion with banks agreeing to fund refinancings and writedowns of loan principal balances, among other steps, the people said.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment on the negotiations. Mark Rodgers, a spokesman for New York-based Citigroup, declined to comment on whether the bank opposed Bair.

Five Lenders

The other companies involved in the talks are New York-based JPMorgan Chase & Co., San Francisco-based Wells Fargo & Co. and Detroit-based Ally Financial Inc.

The value of a deal would be less if California Attorney General Kamala Harris doesn’t sign on. She announced in September that she was breaking away from the talks to conduct her own investigation. The agreement would increase if more servicers are included in the agreement, the people familiar with the talks said.

“We’re certainly hopeful we’ll reach an agreement by Christmas, but there are no guarantees,” Greenwood said.

Bair, a former assistant Treasury secretary and New York Stock Exchange executive, took the helm at the FDIC in June 2006 after being appointed by President George W. Bush.

A Republican who once served as a policy aide to Bob Dole, former U.S. senator for her home state of Kansas, she drew praise from Democratic lawmakers in guiding the FDIC through the financial crisis that saw banks fail at the fastest pace since the savings-and-loan scandal.

Conflict With Geithner

At the same time, she found herself at odds with government officials including Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York during the Bush administration and sought to have her replaced as chairman after President Barack Obama was elected in 2008.

Lawmakers including Representative Barney Frank, the Massachusetts Democrat who led efforts to enact the regulatory overhaul that bears his name, praised Bair for pushing banks and regulators to protect homeowners as foreclosures soared after the collapse of the U.S. mortgage market.

Bair successfully pushed for the FDIC to be given authority under the Dodd-Frank Act for unwinding failed companies whose collapse could threaten the broader economy as happened in 2008.