Calif. Expected to Join Mortgage Settlement, N.Y. Likely to Follow

WASHINGTON — California Attorney General Kamala Harris is expected to join a multi-state settlement with the top five mortgage servicers and New York's AG could soon follow, according to sources familiar with the negotiations.

New York AG Eric Schneiderman and Harris have been the two biggest hold outs on the proposed settlement, which had the backing of more than 40 states as of a Monday night deadline. According to two sources, who requested anonymity because they were not authorized to speak publicly about the deal, Harris is now prepared to sign on.

New York, meanwhile, appears increasingly likely to join the settlement, according to the sources.

Officially, at least, nothing has changed.

A spokesman for Harris said her position has not altered since Sunday, when she issued a statement saying, "We are closer now than we've been before, but we're not there yet."

Media reports surfaced Monday that Harris, who withdrew from negotiations in September, had come back to the table and was in direct talks with the Obama administration over the final details.

A spokesman for Schneiderman did not respond to a request seeking comment. The New York AG had planned to make a statement about the settlement Tuesday night, but at the last minute he postponed the conference call indefinitely without any explanation.

Schneiderman and Harris have been two of the most vocal critics of the proposed settlement terms, which they criticized as too lenient toward banks. They also called for more comprehensive investigations of servicer conduct, and resisted terms that might preclude future lawsuits related to mortgage origination and securitization.

Observers said Schneiderman's appointment to lead a new Justice Department working group investigating mortgage securitization could bring him back to the negotiating table, and provide political cover for other hold-outs.

The final settlement amount, which could total roughly $25 billion, depends on exactly which states join the deal. Several other critical states, including Nevada, Delaware and Massachusetts, have declined to offer their support.

A spokeswoman for Nevada AG Catherine Cortez Masto said Wednesday that she "continues to review the terms of the settlement and has not yet decided one way or another if she will opt in or opt out."

A spokesman for Delaware AG Beau Biden said in a statement issued Monday that he continues to review the deal.

"Attorney General Biden continues to consider the terms of the settlement and advocate for improvements that address his concerns," the statement said. "Delaware's timeline for agreeing to the settlement is dictated by whether our concerns are met."

A spokesman for Massachusetts AG Martha Coakley declined to comment.

The deal includes $17 billion in direct relief for borrowers, $3 billion for a refinancing program for underwater borrowers and $5 billion to be distributed by the states and federal government for foreclosure-related initiatives.

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Comments (1)

Whether CA and NY join is anticlimactic. The quibbling over the amount of the settlement was foolish. $17B or $25B has never been the issue. Of bigger concern is the ultimate trickle-down (how Reaganesque)to the affected homeowners. The Banks have wanted a "free" pass as to future suits and an indemnification from suits by borrowers who are now out of house and home. I know that there will be the hue and cry of "they only got what they deserved; after all they didn't make their payments - so the paperwork was faulty - they didn't pay!" (I worked at a bank where a fellow SVP called it the "Human Cry" - never knew if it was a clever pun or...). Here there is a human cry and it's from the families who fell behind for legitimate reasons (loss of job due to federal program cutbacks), tried to get a modification but before they could react their house was gone. I have worked with nearly 100 variations of that scenario in the past 3 years! And I have handled 50+/- of the situation where the house got to be too expensive and the homeowner stopped paying because the mtge co refused payments after 90 or 120 days delinquent.For that first group, where there were no assignments, where MERS initially foreclosed, where HAMP was ignored or where a major Lender/Servicer stated to me "We don't have to do modifications because we did not take any Federal ("TARP") money", is the group that should be compensated. With the per household figure being $1,500, that's not even 1st, last and security for an apartment, and in many places barely 1st month's rent.The Securitization of mortgages into RMBS made this fiasco possible. In a sense, the banks have had to deal with the losing cards they got in the draw. The suit should have included the rating agencies, the Investment Banks, and all who facilitated a swindle that makes Madoff look like a low level Ponzi scheme.I cannot point a finger at any one individual, organization, regulator, administration etc and say "You caused this world recession!!" That being the case, the Banks that allowed forged or failed documents to be used, corrupted the Civil side of the legal system by swamping Plaintiffs' lawyers with Wall Street law firms to a point where, even though all procedures were followed the hired guns won.I ran failed S&Ls in MD and part of the BNE mess in MA - I have chased and caught the thieves and cut the business/person who just got a raw deal some slack. Here we have Corporate Persons, some of which took "assets" at the request or arm twisting of the Fed, Treasury, OCC, or FDIC, being asked to pay a quarter's earnings to make up for a systemic failure. That's the price for being in the game but here everyone has lost. Stockholders, displaced CEOs and other officers, Homeowners, Administration officials etc. The $25B is just hush money - hush to the whole bloody mess.Richard Isacoff

rii@isacofflaw.com

Posted by riisacoff | Wednesday, February 08 2012 at 7:51PM ET

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