Negotiations between states and banks may end in immunity for banks – insurance industry levies concerns

Insurance IndustryThe mortgage crisis of 2008 played a major role in the economic recession of the same year. The effects of the recession are still felt to this day, despite reports of a recovering economy. In the wake of the recession, states and some of the largest banks and financial institutions in the U.S. have been negotiating on how to address future mortgage abuses. Those negations are rapidly reaching a climax.

Representatives from states and banks are set to reach a deal by the end of this month. The deal, which has a $25 billion settlement attached to it, will grant banks a great deal of legal immunity from states that were most impacted by the mortgage crisis. In return, banks would refinance loans for homes where borrowers owed more than the property was worth. The deal could have implications for the insurance industry as it has long held ties with banks and mortgaged properties.

The immunities offered to banks will ensure that they cannot be the target of lawsuits from consumers or states. These immunities will also offer banks protection against claims coming from insurers who suffered losses as a result of the mortgage crisis. While banks will have to submit to new regulations, insurers fear that the immunity will encourage banks to continue offering less-than-beneficial mortgage deals, which could put both industries in further jeopardy.

Insurance officials will have a chance to weigh in on the issue this month while negations continue.

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