Bloomberg News

New York, California Said to Be Signing on to Mortgage Deal

February 10, 2012

(Updates with holdout states in fourth paragraph.)

Feb. 8 (Bloomberg) -- New York and California are joining a multistate accord with banks over foreclosure practices, a person familiar with the matter said today.

New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris, who have been among the most outspoken in pushing for changes to the accord said to be worth $25 billion, were among those who hadn’t joined as of a Feb. 6 deadline. More than 40 states signed on, Iowa Attorney General Tom Miller, who is helping to lead talks with the banks, said that day, without specifying which states were holding out.

All 50 states announced almost 16 months ago they were investigating bank foreclosure practices following disclosures that faulty documents were being used to seize homes. Officials from states and federal agencies, including the Justice Department, have since negotiated terms of a proposed settlement with five banks.

Massachusetts hadn’t joined the proposed accord as of yesterday, while Florida and Nevada had yet to sign on as of earlier today, according to officials in those states. Arizona also hadn’t joined as of earlier today, according to a person familiar with the matter who didn’t want to be identified because it wasn’t public.

Shum Preston, a spokesman for Harris, didn’t immediately return phone or e-mail messages seeking comment today on California joining the settlement.

Dani Lever, a spokeswoman for Schneiderman, declined to comment. Geoff Greenwood, a spokesman for Iowa’s Miller, didn’t immediately return an e-mail seeking comment.

Last-Minute Demand

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. made a last-minute demand as a condition of the settlement that New York drop claims filed against them Feb. 3, said the first person, who didn’t want to be identified because the negotiations are private. The push by the three banks raised an obstacle in getting Schneiderman’s support for the deal, said the person.

New York sued Charlotte, North Carolina-based Bank of America, New York-based JPMorgan and San Francisco-based Wells Fargo in state court in Brooklyn, saying their use of a mortgage database known as MERS led to improper foreclosures. The other two banks involved in the nationwide settlement proposal, Ally Financial Inc., based in Detroit, and New York-based Citigroup Inc., weren’t named in the complaint.

Joining the multistate agreement won’t block Schneiderman from pursuing the MERS claims, the first person said today.

Liability Releases

The scope of liability releases protecting banks from future litigation has been one of the biggest concerns for some attorneys general, including Harris and Schneiderman, who started separate probes of mortgage operations of banks. Without Harris, the deal’s potential value was projected to drop by several billion dollars, according to another person familiar with the talks.

As recently as yesterday, Harris said the deal didn’t come close enough to bringing “real relief to the hardest-hit homeowners.’”

Negotiations over the settlement have concerned requirements for how the banks conduct foreclosures and provide mortgage refinancing for underwater borrowers -- people who owe more on their mortgages than their homes are worth. Talks have also focused on getting lenders to fund loan principal reductions and make payments to states and borrowers who lost their homes to foreclosure.

Nevada Attorney General Catherine Cortez Masto is still reviewing terms of the proposed settlement, her spokeswoman, Jennifer Lopez, said today in an e-mail.

Florida Attorney General Pam Bondi “is actively involved in the settlement discussions,” her spokeswoman, Jenn Meale, said today in an e-mail.

--With assistance from Joel Rosenblatt and Peter Blumberg in San Francisco. Editors: Peter Blumberg, Michael Hytha

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

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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