Side Deal With Bank Of America Would Cede Liability In Exchange For Homeowner Relief

WASHINGTON -- Federal and state prosecutors are in advanced negotiations with Bank of America in pursuit of a settlement that would forgive the bank for a broad range of past mortgage abuses in exchange for fines that would finance a significantly expanded relief program for struggling homeowners, according to three people with direct knowledge of the matter.

The negotiations are separate from ongoing talks between the nation's five largest mortgage handlers and the U.S. Department of Justice, the Department of Housing and Urban Development and all 50 state attorneys general. Those talks, led by Justice and involving all five companies, are seeking a settlement to resolve allegations of past wrongdoing like so-called "robo-signing," in exchange for lower payments and reduced mortgages for potentially millions of troubled borrowers.

But the options under discussion with Bank of America, the largest U.S. bank by assets, go beyond what's on the table in the larger group talks. Justice, along with a small band of state legal officers, is pursuing an agreement that would have the bank forgive what participants described as a significant amount of mortgage principal owed by distressed borrowers in exchange for receiving an effective grant of immunity from government prosecution related to alleged mortgage and foreclosure wrongdoing.