BLOOMBERG–

A push by U.S. banks to win broad liability releases has become one of the main obstacles in talks to resolve a nationwide probe of mortgage-servicing and foreclosure practices, two people briefed on the matter said.

The mortgage servicers want protection from additional state and federal claims over their mortgage practices as part of reaching a settlement that may exceed $20 billion, according to the people, who declined to be named because the talks are private. The banks are seeking releases that go beyond servicing of mortgages to include lending and securitization of loans, one of the people said.

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* Negotiations continue despite evidence of continuing irregularities

* Reuters report helps prompt senators to demand information

REUTERS-

NEW YORK, July 20 (Reuters) – State attorneys general are negotiating to give major banks wide immunity over irregularities in handling foreclosures, even as evidence has emerged that banks are continuing to file questionable documents.

A coalition of all 50 states’ attorneys general has been negotiating settlements with five of the biggest U.S. banks that would include payment of up to $25 billion in penalties and commitments to follow new rules. In exchange, the banks would get immunity from civil lawsuits by the states, as well as similar guarantees by the Justice Department and Department of Housing and Urban Development, which have participated in the talks.

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Abstract:

Securitization does not explain the reluctance among lenders to renegotiate home mortgages. We focus on seriously delinquent borrowers from 2005 through the third quarter of 2008 and show that servicers renegotiate similarly small fractions of securitized and portfolio loans. The results are robust toseveral different definitions of renegotiation and hold in subsamples where unobserved heterogeneity is likely to be small. We argue that information issues endemic to home mortgages where lenders negotiatewith large numbers of borrowers lead to barriers to renegotiation fundamentally different from thosepresent with other types of debt.