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U.S. banks push for broad liability releases as part of mortgage settlement

July 22, 2011 12:50PM

A push by U.S. banks to win broad liability releases has become the most contentious issue in talks to resolve a nationwide investigation of mortgage servicing and foreclosure practices, Bloomberg News reported.

As part of a settlement, mortgage servicers such as Bank of America, JPMorgan Chase and Citigroup are demanding protection from additional state and federal claims. The releases would go beyond mortgage servicing, and cover lending and securitization of loans, sources said.

New York Attorney General Eric Schneiderman, who is investigating the bundling of mortgage loans into securities, doesn’t want probes hindered by a broad settlement of liability, Bloomberg said.

“Attorney General Schneiderman remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis,” a spokesperson for the attorney general said.

As previously reported, America’s largest mortgage providers are nearing a deal with the Department of Justice and 50 state attorneys general to work out some “thorny” foreclosure issues, including robo-singing. A proposed settlement, scheduled to be announced in the next few weeks, could range as high as $60 billion and include provisions for principal reduction. [Bloomberg]