Smaller Banks Now Under Fire for Foreclosure Abuses

September 10, 2012

After a landmark mortgage settlement against the nation’s largest banks earlier this year, the U.S. state attorneys general are now investigating smaller banks for alleged foreclosure mishandlings. 

The U.S. state attorneys general are reportedly targeting U.S. Bancorp, PNC Financial Services Group Inc., SunTrust Banks Inc., and HSBC Holdings Plc. 

The banks have yet to speak publicly about the investigation or any potential settlement talks. But several of the banks have reportedly set aside millions of dollars in reserves in case a settlement is reached. 

“If a settlement were reached it would likely include an agreement to comply with specified servicing standards, and settlement payments to governmental authorities as well as a monetary commitment that could be satisfied under various loan modification programs,” according to a filing by U.S. Bancorp.

Earlier this year, state attorneys general and federal officials reached a landmark $25 billion settlement with the nation’s five largest banks over foreclosure mishandlings. The banks involved in the settlement were JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, and Ally Financial Inc. As part of the settlement, the banks were required to provide aid—in the form of debt forgiveness, loan modifications, forbearances, or short sales—to struggling home owners as well as compensate home owners who had wrongfully lost their homes to foreclosure.

Source: “Four Regional Banks Discuss Settlement Over Foreclosures,” Bloomberg-Businessweek (Sept. 7, 2012)