Ever since the "robo-signing" scandal broke amid the larger foreclosure crisis, there has been a question of what the consequences should be for the offending mortgage lenders. The consequences for the homeowners were swift and devastating, but determining what should happen to the banks has been dragging on and on for months.

In the media, including this blog, there was some buzz in the last few months that a settlement between the state attorneys general and the major mortgage lenders was close to being agreed to. The banks would change the way they process foreclosures, and at the same time pay billions in fines that would be used to assist distressed homeowners. Now, though, the self-imposed deadline for a settlement has passed, and a final agreement looks to be in doubt.

If the big mortgage lenders like Bank of America and JPMorgan Chase won't reach a settlement, then a number of state attorneys general have said that they will pursue lawsuits against the big banks over their unfair and improper foreclosure practices.

One of the banks' practices that has been exposed in the foreclosure crisis is "dual tracking." What the lenders do is offer a trial mortgage modification, accept payments from the homeowner under the new arrangement, but then foreclose on the property anyway. By playing on the homeowner's trust and their hope that they can keep their home, the banks simply take some extra money from the homeowner.

Fort Lauderdale foreclosure defense attorneys foresee that a settlement that does not include the elimination of dual tracking is going to be a big problem for many state attorneys general. Compensation for homeowners that were foreclosed on in a dual tracking scheme is something that is also being sought. If the banks continue to try to lowball the attorneys general, there could be thousands of lawsuits against mortgage lenders, tying up more resources in the courts. Even so, many attorneys general are saying they have the resources and the will to pursue cases if the banks will not come to the settlement table.

Source: Bloomberg "Banks Will Be Sued If Foreclosure Practices Talks Collapse, Two States Say" 6/22/2011