States Offer Banks Immunity From Mortgage Lawsuits

In exchange for up to $25B payoff
By Kevin Spak,  Newser Staff
Posted Sep 6, 2011 8:36 AM CDT
States Offer Banks Immunity From Mortgage Lawsuits
Bank of America is seen as especially vulnerable to mortgage-related lawsuits thanks to its acquisition of Countrywide Financial.   (AP Photo/Chuck Burton, File)

(Newser) – State prosecutors are offering big banks an expensive Get Out of Lawsuits Free card. Prosecutors have offered a variety of banks caught up in the “robosigning” scandal immunity from some litigation in exchange for a total of $10 billion to $25 billion in penalties, the Financial Times reports. Some officials think the immunity being offered is far too broad; as written, it could potentially free the banks from lawsuits related to their securitization practices, or at least impede cases related to it.

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Yet the banks, some of which have seen their stock prices plummet thanks to litigation fears, call the proposal a “non-starter.” They’ll meet with prosecutors again this week to negotiate further. The deal will include other issues as well, including new standards for governing home loans, which the sides are close on, and new compliance and enforcement standards, which they’re not. The banks involved include Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial. (Read more mortgage robo-signing scandal stories.)

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