Banks Offer $5 billion to Settle Robo-Signing Probe: Wall Street Journal

The Wall Street Journal late Tuesday reported that the five largest mortgage servicers in the U.S. have offered the government $5 billion to settle an investigation into their mortgage foreclosure practices, including the alleged use of “robo-signing” to quickly process home repossessions.

The Journal, citing individuals close to the matter, said that Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, and Ally Financial (formerly GMAC) offered the $5 billion to compensate borrowers who were unfairly foreclosed upon. The government had reportedly been seeking more than $20 billion in penalties and restitution.

The five banks service about 59 percent of all mortgages in the U.S., according to BusinessWeek.

A central issue in the probe of foreclosure practices is the use of so-called robo-signers; paralegal professionals that process hundreds of court documents per day, far above the reasonable level for proper review. The ARM industry, especially debt buyers, has similarly come under scrutiny for the rapid processing of legal documents in preparation for court cases.