Foreclosure deal slowed by infighting: sources

U.S. regulators' efforts to settle with banks over improper mortgage foreclosures are being hampered by infighting among the groups involved in the talks, and a settlement may take a while, according to sources familiar with the matter.

Banking regulators, a coalition of state attorneys general, and the biggest U.S. mortgage lenders are trying to forge a settlement with banks, which have been accused of foreclosing on borrowers without having the necessary paperwork in place.

Sources familiar with the settlement talks say the various groups disagree on the size and scope of a settlement, with bank regulators pushing to outline a settlement plan as soon as mid-March.

Analysts said the discussions highlight the difficulties of reaching a universal settlement as disparate groups are attempting to hammer out a single accord.

It is herding cats, there's no question about it, and they are not always the most agreeably tempered cats, said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a firm that advises on regulatory policy.

For example, the members of the Treasury team setting up the new Consumer Financial Protection Bureau, along with the Federal Deposit Insurance Corp, have been pushing for a larger financial settlement than the Office of the Comptroller of the Currency, the sources said.

The Federal Reserve appears to be somewhere in the middle and has not backed the OCC's approach, as regulators continue to focus on the size of the penalty for improper foreclosures.

Spokesmen for several of the federal agencies involved in the talks were not immediately available for comment.

U.S. Department of Housing and Urban Development spokeswoman Melanie Roussell and OCC spokesman Bob Garsson declined to comment.

Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller said on Wednesday that the attorneys general were approaching a very sensitive time of negotiations.

Miller is spearheading the 50-state attorneys general probe into mortgage lenders' foreclosure practices.

There are a number of federal agencies involved here, and not all agencies have the same ideas of where they should go, Greenwood said, adding that it may not be accurate that any universal settlement would apply the same language to all parties, including the attorneys general.

He declined to comment on what specific remedies the attorneys general coalition would seek, or the status of the group's investigation.

On Tuesday, the Wall Street Journal reported the Obama administration was pushing for a settlement that would include reductions in loan principal for struggling homeowners.

The newspaper also said some attorneys general and federal agencies want a $20 billion settlement that would include civil fines or create a fund to assist homeowners.

Last fall, the biggest U.S. mortgage lenders -- including Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Ally Financial Inc's GMAC Mortgage -- temporarily halted or refiled paperwork on foreclosures nationwide.

The attorneys general probe into the matter began soon after, and the Securities and Exchange Commission, the Department of Justice and bank regulators have opened their own inquiries.

(Additional reporting by Scot Paltrow, Corbett Daly and Rachelle Younglai in Washington and Dan Levine in San Francisco; editing by John Wallace and Gerald E. McCormick)