All things considered, this doesn't look like too bad of a deal, as banks are not being released from criminal liability.
WASHINGTON -- The Obama administration, state attorneys general, and, perhaps, the nation's largest banks are close to a final settlement on the years-long struggle over allegations of massive foreclosure fraud, according to several sources familiar with the talks. And the final details of the arrangement, according to the source who revealed them, will apparently not preclude prosecutors and regulators from taking legal action against many of the common abuses during the house bubble. It remains to be seen whether all parties will ultimately sign off on the language.
The settlement is worth $25 billion, a sum which will be distributed to homeowners who were wrongfully foreclosed on as well as those who remain underwater. In addition, banks could still face future legal action over 12 specific violations.
According to someone intimate with the negotiations, there will be no legal release of the banks with respect to:
- Criminal liability.
- Tax liability
- Fair lending, fair housing, or any other civil rights claim.
- Federal Housing Finance Agency or the GSEs [Fannie Mae and Freddie Mac]
- CFPB claims for the period after they came into existence in July 2011
- SEC claims
- National Credit Union Association Claims
- FDIC claims
- Federal Reserve Board claims
- MERS claims
In addition, the source said, there will be preservation of the vast majority of securitization claims including all claims regarding state pension funds as well as the vast majority of the origination fraud claims from HUD, the VA and the USDA.
According to Mike Lux, who originally reported the settlement for The Huffington Post, the release will be "almost entirely confined to robosigning cases" -- meaning that banks will likely not see further punishment from the states for foreclosure fraud. Robosigning fraud is perhaps the easiest type of misconduct for prosecutors to target.
That said, their legal liabilities on the federal level remain vast, even after handing over $25 billion for homeowner relief.
The announcement is, in some regards, a victory for the few state attorneys general who, over the course of several months, refused to sign off on a quick and limited settlement with the big banks.
"I think it is fair to give [New York Attorney General] Eric Schneiderman and the other progressive attorneys general a lot of credit for holding the line," said a source intimate with the negotiations. "This is a big victory for them."