Former Federal Deposit Insurance Corp chairman Bair in the frame

NEW YORK - Sheila Bair, the former Federal Deposit Insurance Corp chairman, is a leading candidate among state officials to ensure banks comply with any settlement of a nationwide foreclosure probe, a person familiar with the matter said.

Bair, who led the agency from 2006 until stepping down this year, is supported by some state officials as a third-party monitor of any settlement with mortgage servicers, including Bank of America Corp, the person said. At least one bank in the talks, Citigroup Inc, opposes her selection, said the person, who didn't want to be named because the talks are private.

Selection of the monitor is among the last issues still to be worked out between the banks and state and federal officials before a final agreement is reached, according to that person and another person familiar with the matter who also didn't want to be identified because the talks are private.

All 50 states last year said they were investigating bank foreclosure practices following disclosures that the companies were using faulty documents in seizing homes. State and federal officials leading the talks are seeking an agreement that provides mortgage relief to homeowners and sets standards for foreclosure practices.

The monitor would ensure compliance with any agreement, according to a settlement proposal offered to the banks in March.

The monitor will have authority to access records and audit a servicer's performance, according to the document. Banks would be subject to penalties for failure to meet performance measures and timelines.

Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, declined to comment on whether Bair is a candidate for the monitor position. Miller is leading the talks for the states.

Bair didn't immediately return phone or e-mail messages seeking comment on the appointment of a monitor.

Mark Rodgers, a spokesman for New York-based Citigroup, didn't immediately respond to an e-mail seeking comment or return a phone message left at his office. A representative of the bank also didn't immediately return a message seeking comment on the talks left with Citigroup's main media line. Lawrence Grayson, a spokesman for North Carolina-based Bank of America, declined to comment on the negotiations.

Both sides in the negotiations have agreed to the framework of a deal, according to the two people familiar with the talks. The deal with the five largest mortgage servicers could amount to $25 billion with banks agreeing to fund refinancings and writedowns of loan principal balances, among other steps, the people said.

The other companies involved in the talks are New York-based JPMorgan Chase & Co, San Francisco-based Wells Fargo & Co and Detroit-based Ally Financial Inc.

The value of a deal would be less if California Attorney General Kamala Harris doesn't sign on. She announced in September that she was breaking away from the talks to conduct her own investigation. The agreement would increase if more servicers are included in the agreement, the people said.

"We're certainly hopeful we'll reach an agreement by Christmas, but there are no guarantees," Greenwood said.

Bloomberg News