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Mortgage deal won't end problems

Feb 14, 2012 - By Nathaniel Popper and E. Scott Reckard MCT

NEW YORK -- A nationwide settlement on foreclosure practices has ended one headache for the banks involved, but there are signs that it is only the beginning of many others.

The agreement between 49 states and five large banks gives the financial giants immunity from future complaints about some aspects of their foreclosure practices. The banks had previously made changes to improve the way they foreclose on homeowners and had put aside most of the funds necessary to pay for the $25 billion settlement.

Until recently, analysts thought this might put to rest many of the largest complaints about the role the banks played in the financial crisis and its aftermath. It hasn't.

There are a growing number of signals that prosecutors and regulators are stepping up efforts to bring new lawsuits and criminal charges in connection with the crisis.

"The mortgage foreclosure settlement in many ways is just the least of their problems," said James Cox, a professor of securities law at Duke University in Durham, N.C. "The banks are not going to see the bright sunlight for some time to come."

The settlement releases the banks from claims involving foreclosures, mortgage customer servicing and loan originations. But authorities can still investigate various fraud claims, including those involving the mortgage bonds whose meltdown triggered a global financial crisis.

What's more, there is no criminal immunity or release from private claims by individuals or class-action lawsuits.

The settlement itself is still being viewed as a positive thing within the industry, given that it erases one of the many points of uncertainty that have hung over executives and complicated planning for the future.

Wells Fargo & Co. Chief Financial Officer Timothy Sloan hailed the agreement as being good for the company and shareholders. He said in a speech Thursday that the deal "is a significant and important agreement, which we believe is good for the country, good for our customers and good for our shareholders."

Investors did not appear convinced. Shares of Wells Fargo, JPMorgan Chase & Co. and Citigroup Inc. dropped Thursday. Bank of America Corp. shares edged slightly higher.

The hard line against banks, laid out during a briefing Thursday, is a marked shift from just a few months ago. Most of the government's criminal prosecutions against financial executives had fizzled out and a growing number of bank critics were complaining Wall Street was getting off too easy.

Banks also lost out on their attempts during negotiations to be given immunity from future investigations on a broad number of issues related to the mortgage meltdown. New York, California and several other states complained about the banks seeking leniency, and the immunity was narrowed considerably in the final settlement.

"It does not release the group for a host of remaining liabilities," Nomura Securities bank analyst Glenn Schorr wrote Thursday.

When New York Attorney General Eric Schneiderman announced his participation in the settlement Thursday, he said it would not stop several ongoing efforts that he is leading.

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