Landmark foreclosure settlement expected

State and federal officials could announce as soon as Thursday a landmark settlement with five of the nation's banks over their flawed and fraudulent foreclosure practices, people close to the situation said.

Lengthy negotiations over the estimated $25 billion settlement got a big boost Wednesday when California Attorney General Kamala Harris agreed to back the effort, said three people with knowledge of the talks, who spoke on the condition of anonymity because the deal wasn't final.

Negotiations went into the night, with all state attorneys general on board, except for Delaware, but the U.S. Justice Department was expected to host the announcement of the settlement Thursday, sources familiar with talks said.

The five banks at the heart of the settlement are Wells Fargo, Bank of America, JPMorgan Chase, Ally Financial and Citigroup. The five faced a public uproar in 2010 when it became clear that the legal paperwork they had filed in numerous foreclosures included flawed and fraudulent documentation.

The banks agreed to the deal so they could put it behind them, sources said. "Having this thing hanging over everybody's heads isn't good for anybody," said a source familiar with the negotiations. "For us, we'd rather put the 100 people or whatever that's been focusing on this thing all the time, including our most senior people, back to work."

The penalty would include $5 billion to be spread among all the states, $3 billion in refinancing for borrowers and $17 billion in credits through relief to homeowners.

New York Attorney General Eric Schneiderman, an early critic of a deal with broad immunity, declined to comment.

"The release of liability is incredibly narrow," one source familiar with the deal said.

The settlement allows prosecutors to sue for damages over other fraud, including other foreclosure practices, misrepresentation to credit ratings agencies on the mortgages and doctoring of loan documents, the source said.

Early in the negotiations, the lenders did not want any robo settlement findings used against them in other suits, the source said, but that is also out of the settlement.

With The Washington Post