The Obama administration has assembled a new federal-state working group to investigate misconduct in the pooling and sale of risky home loans. State and federal officials are close to a settlement with the largest U.S. banks over mortgage abuses, with states facing an end-of-the-week deadline to decide whether they will join and negotiators agreeing to Joseph Smith, North Carolina's banking commissioner, serving as a monitor to ensure the banks comply with the settlement terms.
The proposed settlement would release these huge U.S. banks only from civil claims of errors in servicing and originating the loans.
In exchange for up to $25 billion, much in the form of cutting mortgage debt for homeowners in distress, Bank of America, JPMorgan Chase & Co, Wells Fargo & Co, Citigroup and Ally Financial Inc. will resolve civil state and federal lawsuits about servicing misconduct and faulty foreclosures, and state lawsuits regarding the manner in which some of those loans were made.
The Obama administration claims that the launch of the working group makes clear its commitment to continue to investigate blatant misconduct that contributed to the financial crisis.