California may join multi-state mortgage settlement
With a Monday deadline at hand, California officials have resumed direct talks with the Obama administration about joining a multibillion-dollar, multi-state mortgage settlement with the nation’s largest banks, a source said Sunday.
The potential settlement would call for banks to provide financial assistance for homeowners who experienced foreclosure or are in danger of losing their homes. It also would require banks to overhaul their mortgage servicing and foreclosure practices as well as include a component for “principal write-downs,” the reduction of mortgage debt for individual homeowners.
Gaining California’s support for the deal would be a significant accomplishment for the administration, which in recent weeks has been trying to step up its aid for the beleaguered U.S. housing market. Monday is the deadline for individual states to either reject or accept a deal; that deadline was originally Friday and was pushed back to allow more time for the high-level negotiations.
The administration has been pushing hard for a settlement among state attorneys general, the nation’s five largest mortgage servicers — Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. — and certain federal agencies. But several attorneys general have expressed skepticism over the deal.
California Atty. Gen. Kamala D. Harris walked away from negotiations last year, saying the banks were asking for too much, including release from future potential legal action by the state.
As recently as two weeks ago, she called the potential $25-billion settlement inadequate for California.
But in a statement Sunday night, Harris said the door remained open for California to join.
“For the past 13 months we have been working for a resolution that brings real relief to the hardest-hit homeowners, is transparent about who benefits and will ensure accountability,” Harris said. “We are closer now than we’ve been before, but we’re not there yet.”
A spokesman for the state attorney general’s office declined further comment.
A person familiar with the negotiations but not authorized to speak publicly confirmed that California was in direct talks with the Obama administration over joining a potential deal.
State attorneys general have been talking with the nation’s five biggest mortgage servicers for more than a year to secure a settlement after revelations of widespread foreclosure processing errors in 2010.
Other key holdouts remain as the political stakes of the foreclosure talks have escalated. In his recent State of the Union speech, President Obama announced that he would step up efforts to find wrongdoing leading up to the mortgage meltdown.
In doing so, the administration appointed perhaps the most vociferous critic of the foreclosure settlement talks, New York Atty. Gen. Eric Schneiderman, to co-chair a new working group that combines efforts by federal and state authorities to probe mortgage fraud.
Schneiderman has been critical of the multi-state foreclosure talks because, he has said, the banks have asked for too much release from future legal actions, potentially limiting broader investigations into Wall Street’s role.
After his appointment by Obama, Schneiderman signaled the foreclosure talks are moving in the right direction, but has not committed to signing on.