A probe of improper foreclosure practices by mortgage services, which began in October 2010, and engulfed the largest U.S. banks, is now drawing within its fold four smaller banks.
According to a report, state attorney generals are trying to get regional banks U.S. Bancorp (NYSE:USB), PNC Financial Services (NYSE:PNC), SunTrust Banks, Inc. (NYSE:STI), and HSBC Holdings plc (LON:HSBA) (NYSE:HBC), to come to a legal settlement regarding the improper foreclosure practices.
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An HSBC spokesman confirmed that preliminary discussions had been held with regulators, but said “the timing of any settlement is not presently known.” The three other banks did not comment.
In February JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC), Bank of America Corp (NYSE:BAC), and Ally Financial Inc., entered into a $25 billion settlement with states and the federal government for improper mortgage practices, including “robo-signing” leading to irregular foreclosures. Read more about this settlement on ValueWalk here.
The smaller bankers are now facing the heat from AGs to settle, or else. On their part, they claim that it is yet to be demonstrated that a state-brokered settlement would be more beneficial to the injured parties, rather than remedial actions by the banks themselves.
Yet, they are preparing for the eventuality of a settlement by making financial provisions.
U.S. Bancorp (NYSE:USB) has set aside $130 million for such an eventuality, according to a filing, which says: “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.”
HSBC set aside $257 million last year for a likely settlement, while PNC reserved $240 million in this regard, in January. However, SunTrust has been unable to quantify the potential liability that may devolve in this issue.