Reuters reports that big consumer mortgage banks have made strong headway recently in their talks with state attorneys general and federal regulators to definitively settle a raft of charges of improper mortgage practices. A deal could be reached by the end of the month.

"Under the proposed terms of the settlement--which could total $25 billion--banks would get a broader relief from potential state civil lawsuits in exchange for refinancing underwater loans, those mortgages where borrowers owe more than their homes are worth."

The big issue in the talks remains legal immunity from private litigation. Obviously, the banks want as much as possible, while some states have pulled out of the process--notably New York and California--arguing that they would not give up the right to sue banks for specific lapses as a part of a settlement.

The remaining states, perhaps swayed by the need to get the economy moving again, seem to be more willing to expand immunity as part of the deal. Originally, they were willing to grant immunity only for lapses with the mortgage paperwork process, now they are willing to grant immunity for errors in originating loans, such as not verifying income, according to the report.

The quid pro quo is that banks will refinance up-to-date mortgage customers who are underwater on their loan. The settlement would certainly help clear up the uncertainty that mars the industry right now. But we've been down this road before. Over the past year, there have been similar signs of a deal, but they always seem to get thwarted late in the process. In any case, we'd like to see separate deals with the likes of Nevada, California and New York as well.

For more:
- here's the article

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