NEW YORK — U.S. lenders, including Bank of America Corp., still face years of litigation and billions of dollars in liabilities tied to the housing collapse after agreeing to settle a probe of abusive foreclosure practices.
Government officials can pursue claims related to the packaging of loans into securities, criminal-enforcement actions and fair-lending violations, U.S. Attorney General Eric Holder said Thursday. The $25 billion deal with the five biggest servicers ends state and federal probes into shoddy foreclosures and pays for debt forgiveness, refinancing and other efforts to keep struggling homeowners in their properties.
“It’s a big check with narrow immunity,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and now an analyst with FBR Capital Markets in Arlington, Va. “You get the state attorneys general off your back, but you’re not getting immunity from securitizations, which could come with their own steep cost down the road.”
Banks, including JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial, negotiated with regulators for 16 months to seek the broadest possible release from claims tied to the creation and servicing of mortgages. They agreed to a deal that doesn’t liberate them from further losses.
President Barack Obama announced during his State of the Union speech last month the creation of a government unit to investigate misconduct in the bundling of mortgage loans into securities. The group will streamline and strengthen current efforts to investigate fraud, Holder said Jan. 27.
