Bloomberg News

New York Removed From Leadership in Foreclosure Settlement Talks

August 24, 2011

Aug. 24 (Bloomberg) -- New York Attorney General Eric Schneiderman, accused of trying to undermine the work of a group negotiating a nationwide foreclosure settlement with U.S. banks, was removed from the panel’s leadership.

Schneiderman, who doesn’t want a settlement to block state investigations, was removed from the executive committee of state officials working on the deal, Iowa Attorney General Tom Miller said yesterday in a statement.

“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” said Miller, who is leading the state group. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.

Attorneys general from all 50 states last year announced their investigation into bank foreclosure practices after reports that faulty documents were being used to seize homes. Since then, a group of attorneys general and officials from federal agencies, including the Justice Department, have been negotiating a settlement with the five largest mortgage servicers in the U.S.

Government officials are seeking an agreement that provides funding for writedowns on mortgage loans for borrowers and sets standards for how the banks service loans, interact with borrowers and conduct foreclosures, according to terms proposed in March.

Negotiation Leaders

An executive committee of 13 attorneys general, not including Schneiderman, and two state banking regulators is leading negotiations on behalf of all 50 states, said Geoff Greenwood, Miller’s spokesman. The executive committee has a smaller committee that negotiates directly with the banks, he said.

Several attorneys general, including Schneiderman, have criticized any possible settlement that would protect banks from state investigations by providing the lenders with broad releases from liability. Those probes include the bundling of mortgage loans into securities.

The attorneys general who want to continue their own probes after an agreement include Martha Coakley in Massachusetts, Delaware’s Beau Biden and Catherine Cortez Masto in Nevada. Delaware is also a member of the executive committee. the 50 state attorneys general.

The companies involved in the talks are Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc.

‘Active Voice’

Schneiderman is committed to a settlement that provides relief to homeowners and allows the housing market to recover, and he will work with state and federal officials to achieve those goals, his spokesman Danny Kanner said in an e-mailed statement.

“Ongoing investigations by attorneys general cannot be shut down by efforts to settle quickly and those responsible must be held accountable,” Kanner said. “While it is Attorney General Miller’s prerogative to remove us from the executive committee, we will continue to be an active voice on these issues as a part of the 50-state coalition and in other forums.”

Schneiderman has raised “important and legitimate concerns” about the scope of the liability releases demanded by the banks, Biden said yesterday in a statement.

“I believe that the events leading up to the mortgage crisis must be fully investigated, including origination and securitization practices, before any broad immunity is granted - - the American people deserve an investigation,” Biden said.

Greenwood declined to elaborate on how Miller thought Schneiderman has undermined the state group.

“It has not been helpful to have a member of our executive committee undermining our effort, and therefore Attorney General Miller made his decision,” Greenwood said in a phone interview. “We are moving forward with our committee, and our efforts continue.”

--Editors: Michael Hytha, Peter Blumberg

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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