Banks still to face fraud, municipal claims after foreclosure accord

Even as a settlement is almost reached with state attorneys general and U.S. banks over illegal foreclosure practices, the financial institutions may still face securities-fraud claims and municipal lawsuits over unpaid mortgage fees. Iowa Attorney General Tom Miller said a settlement with the banks cannot prevent municipalities from suing the lenders for allegedly cheating them out of millions of dollars in filing fees, or states filing securities claims.

Bloomberg reported that state attorneys general and federal officials are reaching a settlement with the largest mortgage servicers in the country, including Bank of America and JPMorgan Chase, which would fund loan modifications for homeowners and set new requirements for how banks must handle foreclosures.

Many states, however, are pursuing their own investigations and settlements with banks. California Attorney General Kamala Harris plans to conduct her own mortgage investigation citing that the group settlement offers a broader release of claims for the banks than she finds acceptable, the news source reported. The settlement would not enable enough California home owners to maintain their homes, Harris said.

In addition to facing further fraud claims, Bank of America is also expected to lose nearly all of the bank's share of the mortgage market it had originally acquired through the purchase of Countrywide Financial in 2008. The acquisition resulted in the majority of the bank's current mortgage litigations, and Countrywide recently announced it will no longer buy mortgages made by smaller banks, which accounts for half of its mortgage volume, Reuters reported.

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