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Reuters is reporting that the Department of Justice, nearing agreement on a $20-25 billion mortgage abuse settlement with five banks, has reached out to additional banks in a move to broaden the impact of the settlement and increase its total amount.The banks the government has contacted and asked to join the settlement are HSBC, MetLife, SunTrust Bank, US Bancorp, OneWest Bank, Sovereign Bank and Aurora Bank.
The government’s aim in adding additional banks to the settlement, beyond increasing its size, is to allow more homeowners to receive aid.
The funds from the settlement will be directed to homeowners affected by misconduct such as the now infamous practice of ‘robo-signing’, as well as the mishandling of foreclosures and abuses in originating and servicing mortgages.
The inclusion of the additional banks would drive the price tag of the settlement higher, potentially by as much as $5 billion, according to an industry expert. This is due to the additional banks relatively smaller participation in the mortgage market.
While the broad structure of the settlement is set, key details, such as Sheila Blair’s involvement in an oversight role and the extent of immunity from future lawsuits that would be granted are still in flux.