Nation’s largest banks may face $17 billion in lawsuits over foreclosure abuse

The nation’s largest banks could face a potential liability of $17 billion in civil lawsuits if a settlement isn’t reached to address improper foreclosure practices, state attorneys general said yesterday, according to the Wall Street Journal.

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Banks and federal officials have been going back and forward in the last two months trying to settle allegations of abuses related to mortgage servicing which emerged last fall, and the two parties are still not agreeing. The banks are proposing a $5 billion settlement to compensate wronged borrowers while some federal officials are pushing for more than $20 billion.

The numbers floated yesterday do not account for the additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development. The U.S. Trustee Program, an arm of the Justice Department that deals exclusively with bankruptcy cases, is asking for between $500 million and $1 billion in penalties. [WSJ]