* 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 (Reuters) - 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 Justice Department.
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 forward.
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 industry.
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 agreement.
Among the issue to be addressed in the plans due next week are:
-- 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 program; and
-- How banks will end the so-called "dual tracking" practice of starting a foreclosure while a loan modification is pending.
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)