Bank CEO urges quick deal in wide foreclosure probe

A quick settlement of the 50- state probe of the U.S. mortgage foreclosure crisis would be the best solution for all involved, the chief executive of Bank of America said Tuesday.

The call for a settlement by Bank of America CEO Brian Moynihan was followed by a report from CNBC that the Iowa attorney general, who is leading the 50-state probe, was getting close to a settlement with Bank of America, the largest U.S. mortgage servicer, and with JPMorgan Chase and Wells Fargo.

Under the proposed settlement the banks would pay into a fund for foreclosed borrowers, CNBC reported. The settlement, which was not expected for at least a month, would also include banks' doing away with simultaneous modification and foreclosure proceedings with individual borrowers, CNBC said.

Banks are accused of having used "robo-signers" to sign hundreds of foreclosure documents a day without proper legal review. Allegations that banks' use of shoddy paperwork resulted in struggling borrowers being illegally evicted from their homes reignited public anger with banks that received billions of dollars in taxpayer aid during the financial crisis.

"It is in everyone's best interest to get this settled and behind us," said Moynihan, speaking at the Bank of America Merrill Lynch Financial Services conference in New York.

News of a move toward a possible settlement came as major U.S. banks sought to assure lawmakers they have a handle on mortgage servicing problems amid renewed pressure to find ways to keep borrowers in their homes.

Top officials from Bank of America and JPMorgan Chase testified Tuesday before the Senate Banking Committee in the first appearances on Capitol Hill by major lenders since the furor over sloppy foreclosure paperwork erupted in September. Committee chairman Christopher Dodd said at the hearing that he is concerned mortgage servicing problems go beyond the recent questions about whether paperwork is being properly handled.

Monitoring mortgages

PRE-1996: CLERK'S OFFICE. When lenders and investors sold mortgages before 1996, the new owner's name would be recorded in county clerk offices. That often took months. It was reliable, but it slowed down how often a mortgage note could be sold on the financial markets, and potential buyers had to find other ways of checking who owned the loan.

MERS. The Mortgage Electronic Registration Systems was set up in 1996 by the mortgage banking industry to allow mortgage sales to be kept in a database, allowing them to be sold more quickly and frequently, but with documentation sometimes catching up later. That freed up capital for more lending and profits.

REAL ESTATE BOOM. Home sales and refinances soared from 2002 to 2006, and so did investments and Wall Street trading of mortgage-backed securities, each of which could contain thousands of loans. Those mortgages could be sold repeatedly. Critics said MERS, the sellers and the buyers could not keep up with reporting and tracking of mortgage deals.