Will a Mortgage Settlement Happen This Christmas?

WASHINGTON — It looks like Iowa Attorney General Tom Miller won't be getting his Christmas wish this year.

Miller, who is leading the settlement talks with the top five mortgage servicers, said earlier this month that the settlement should be reached by the holiday.

But as the negotiations continue, and news reports about last-minute haggling emerge on a daily basis, it seems less likely that a deal will be announced this week — and less clear what the final deal will really look like.

What exactly is going on? We offer the following frequently asked questions to bring you up to speed.

So who exactly is on board?

The major players in this ongoing saga are the same, but it's still unclear where they stand.

All eyes are on California, where Attorney General Kamala Harris continues to weigh that state's participation in the agreement. Harris dropped out of the settlement negotiations in September, when she sent a letter to Miller saying the deal under discussion was "inadequate for California homeowners."

Harris's announcement followed similar moves from attorneys general in New York and Massachusetts, and effectively killed any chance of a multistate settlement, sources said at the time. AGs in Delaware and Nevada have also raised concerns about a potential deal.

Miller, however, has said California may still participate, and insisted a deal will come together even if the state does not sign on to the final agreement. The dollar value could be as high as $25 billion, but would drop significantly, to about $19 billion, if California does not participate.

As for the banks, the settlement would involve the top five mortgage servicers: Bank of America Corp., Wells Fargo & Co., Ally Financial Inc., Citigroup Inc. and JPMorgan Chase & Co. But the banks have yet to sign on to any final agreement.

What does the agreement look like?

Although the details are still being ironed out, the settlement dollar value would pay for principal write-downs and interest rate deductions for certain borrowers. The agreement would also put in place new servicing standards, which officials have said they hope to align with the standards imposed by banking regulators through consent orders with the 14 largest mortgage servicers.

Sources on both sides have said they are mostly in agreement over servicing standards. Talks had stalled over the summer on the issue of future lawsuits, specifically whether the banks will be released from liability for past servicer-related misconduct.

Banks had sought releases relating to mortgage securitization — something New York Attorney General Eric Schneiderman and others strongly opposed.

But a new wrinkle emerged last week when reports surfaced that the banks were also seeking assurances from the Consumer Financial Protection Bureau that it would release them from liability related to mortgage origination.

Wait, the CFPB isn't involved in the negotiations, is it?

No, not exactly.

The agency dropped out of any talks on the settlement in the spring, after documents revealed that CFPB officials had spoken with state officials about the settlement. The industry accused Elizabeth Warren and the bureau of meddling in the negotiations — they suggested it was CFPB that proposed the initial $20 billion settlement amount — and Republicans blasted it for acting without any legal authority. Warren insisted that she merely gave advice to the state AGs when asked.

Since then, the CFPB has not been involved in any settlement negotiations, save for an occasional briefing from federal officials.

Only in the last few weeks did it become clear that banks were actually seeking CFPB's involvement in the deal — they want assurances that the bureau will waive their right to pursue any claims related to problems with mortgage originations that transferred to the bureau from the Department of Housing and Urban Development.

Although industry observers were skeptical the consumer agency would agree to the releases, it's still not clear which way they will come down, and one person familiar with the situation said it's off base to suggest the CFPB is the one holding up the process.

When are they going to reach a deal?

Probably in the next couple of weeks, but we wouldn't bet our life savings on it.

Although Miller's statements about a Christmas announcement are the most definitive he's given on a timeline, observers had a hard time believing that the group could actually pull it together by this week. A deal seemed imminent last spring and again before Labor Day, but talks stalled both times.

Sources said the two sides are closer than they've ever been, and it would make sense to announce a deal while Congress is still in recess — and long enough to allow the dust to settle before they return on Jan. 23.

What else is holding this up?

Both sides are also working to find a monitor to oversee the agreement and ensure that banks are complying with it.

Several names have emerged in news reports this week, including North Carolina Banking Commissioner Joseph Smith; Steven Cohen, a former aide to New York Governor Andrew Cuomo; and Nicolas Retsinas, a former assistant secretary of the Department of Housing and Urban Development.

Former Federal Deposit Insurance Corp. Chairman Sheila Bair was also under consideration for the job, but turned down the position months ago.