* Mortgage servicing plans are due to regulators next week
* DOJ and states say progress made in talks with banks
By Dave Clarke
WASHINGTON, July 8 U.S. banks will submit plans
to federal regulators next week on how they will overhaul their
foreclosure practices, even as related settlement talks with
states and the Justice Department drag on.
Last month, banking regulators delayed the deadline for
submitting these plans until July 13 at the request of the
The hope was that by then, the states, Justice Department
and major banks would strike their own partial settlement that
could be tucked into the foreclosure revamp plans banks must
submit to their direct regulators as part of a separate
settlement reached in April.
"We are making a lot of progress, but we will not finish
next week," said Geoff Greenwood, a spokesman for Iowa Attorney
General Tom Miller, who is leading the negotiations on behalf
of state governments.
This marks the latest stumble as federal and state
regulators negotiate various deals with major banks to get them
to pay fines for foreclosure shortcuts and fix them going
Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N),
JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Ally
Financial have been the main players in the talks.
The government has been probing them and other firms for
shoddy mortgage practices, including the use of "robo-signers"
to sign hundreds of unread foreclosure documents a day.
Settlement talks have been going on for months without a
clear path to conclusion, even as all involved say they want to
put the issue behind them.
Bank investors are watching the negotiations closely to see
how much the institutions might have to pay up in fines. That
figure has been estimated at about $20 billion for the
The most concrete progress so far has been a partial
settlement the major banks reached in April with the Office of
the Comptroller of the Currency, the Federal Reserve and the
Office of Thrift Supervision.
As part of that pact, the 14 large housing lenders agreed
to overhaul mortgage operations and compensate borrowers who
were wrongly foreclosed.
No monetary penalty has been announced as part of this
Among the issue to be addressed in the plans due next week
-- How banks will make sure affidavits are not filed in
court where an employee falsely vouches for personally knowing
the details in a foreclosure case to be true;
-- Making sure there is a single point of contact for
borrowers involved in a foreclosure or loan modification
-- How banks will end the so-called "dual tracking"
practice of starting a foreclosure while a loan modification is
A spokeswoman for the Justice Department said that, while a
deal will not be done by next week, the negotiations between
the Justice Department, states and banks have had an impact.
"The negotiations have guided these action plans that are
going to come out," said spokeswoman Jessica Smith.
The banking regulators have to approve the plans and they
could be revised at a later date.
(Reporting by Dave Clarke; editing by Andre Grenon)