President Obama’s decision to create a new task force to investigate risky lending and securitization practices leading up to the financial crisis could complicate and delay a potential $25 billion settlement involving foreclosure and servicing abuses.
Participants in the on-going ‘robo-signing’ settlement negotiations recently signaled that they could be close to an agreement with the government.
However, the President’s new task force – announced during Tuesday’s State of the Union speech – could mean that some bank servicers participating in the settlement talks with state AGs and the Department of Justice could face additional enforcement actions and penalties.
“With the added uncertainty, it’s hard for me see a rapid resolution of the settlement talks,” said Bob Davis, a senior vice president at the American Bankers Association.
The banks seem willing to pay a high amount if they can secure a broad settlement and not face additional claims or enforcement actions. “The banks want to get these issues behind them,” Davis said. “Unleashing another task force raises the possibility of double jeopardy,” he added.
A spokesman for Iowa attorney general Tom Miller said the President’s decision to create a new task force with federal officials and state AGs should not impact the ongoing settlement negotiations.
“We are addressing different aspects of the deep and wide mortgage meltdown, and we fully support this new joint effort,” AG spokesman Geoff Greenwood said.