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Moments before he was scheduled to make a statement on the mortgage servicing settlement Tuesday night, New York Attorney General Eric Schneiderman postponed the conference call indefinitely.
February 7 -
After a yearlong effort to reach a multistate settlement with the top five mortgage servicers, state attorneys general and the firms involved finally appear to be close to a deal. But even before it is signed, there are already questions about how it will be implemented and future litigation risks.
February 6
WASHINGTON — California Attorney General Kamala Harris and New York AG Eric Schneiderman have joined a multi-state settlement with the top five mortgage servicers, according to sources familiar with the negotiations.
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.
Federal and state officials are expected to announce the agreement this morning at a press conference at 10 a.m. The final settlement amount will total at least $25 billion. 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.
Federal officials have been pressuring California and New York for months to sign on to the agreement, but Harris and Schneiderman had publicly said the deal on the table was too weak. Their agreement is a boon for both sides as it means banks will resolve potential litigation in one fell swoop from the vast majority of states over charges of robo-signing and other servicing abuses. The Obama administration, meanwhile, will likely receive a political boost from the agreement, which fits its campaign theme of pursuing bad actors in the financial services industry.
While critics are liable to still view the terms as too lenient to banks, federal officials have kept their options open by forming a task force devoted to exploring possible criminal charges against banks for their actions prior to the financial crisis. The deal announced Thursday would only cover charges related to servicing abuses, not the poor lending standards that led to the housing debacle.
Observers said Schneiderman's appointment to lead the new Justice Department working group investigating mortgage securitization was instrumental in bringing him back to the negotiating table and providing political cover for other hold-outs.
American Banker reported late Wednesday that California was expected to sign off on the agreement, and New York would likely follow suit. The news followed days of fevered speculation over whether the two would sign on, with sources describing the situation on Wednesday as “very fluid.” Schneiderman had canceled a late night press conference on Tuesday night during which he had been expected to speak about the mortgage 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.
