The outlook for securing a broad mortgage settlement that would bring housing relief nationwide has clouded, as California on Wednesday said the latest proposal is inadequate and New York was tapped to help lead a separate mortgage investigation effort.
The outlook for securing a broad mortgage settlement that would bring housing relief nationwide has clouded, as California on Wednesday said the latest proposal is inadequate and New York was tapped to help lead a separate mortgage investigation effort.
The outlook for securing a broad mortgage settlement that would bring housing relief nationwide has clouded, as California on Wednesday said the latest proposal is inadequate and New York was tapped to help lead a separate mortgage investigation effort.
Federal enforcement agencies, state attorneys general and some of the nation's top banks had appeared to be in the final stages to reach a deal that the Obama administration said last week would give relief to one million American homeowners.
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As part of the settlement, the banks would pay up to $25 billion to homeowners, including through principal reduction on troubled loans.
In exchange, the banks would put behind them potential government lawsuits about improper foreclosure and mortgage lending and servicing abuses.
Negotiators have been trying to lure California by saying that homeowners in the populous state could get more than $10 billion of the settlement's value, a person familiar with the matter said recently.
But on Wednesday, a spokesman for Attorney General Kamala Harris said she remained unhappy with the proposed terms, saying they must include meaningful relief and enforcement.
"We've reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California," said spokesman Shum Preston.
New York Attorney General Eric Schneiderman said on Wednesday that he still had concerns that the banks may get too much legal protection in the deal, but he did not rule out joining the settlement.
Speculation grew over the last 24 hours that Schneiderman could join the deal after President Barack Obama tapped him to help lead a new unit at the U.S. Justice Department to coordinate inquiries into abusive home loans and subsequent packaging of the loans into securities.
The appointment was seen as a potential sweetener for Schneiderman to join the multi-state settlement.
In response to reporters' questions about the negotiations, Schneiderman said on Wednesday: "My concern with that has always been to make sure that we're not releasing claims that obviously now are even more important to me because I'm investigating them."
The negotiators could move forward on a deal without California, New York and other holdouts. Delaware earlier this week said it would not join the deal.
The final value of any settlement will depend on how many states join, and it could drop by as much as one-quarter without California, which has an outsized share of the country's distressed properties.
TASK FORCE CONFUSION
The multi-state talks began more than a year ago after reports emerged that banks had robo-signed documents and rushed through paperwork to deal with a flood of foreclosures.
The banks involved in the talks include Bank of America , Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and Ally Financial Inc.
It is unclear how Obama's new mortgage task force will build off of the multi-state settlement that negotiators hope can be sealed in the coming weeks.
A spokesman for the attorney general in Iowa, who is leading the talks on behalf of the states, said: "We are addressing different aspects of the deep and wide mortgage meltdown, and we fully support this new joint effort."
The new unit, named the "Residential Mortgage-Backed Securities Working Group" according to a Justice Department document reviewed by Reuters, will be part of a larger financial fraud task force that Obama created in 2009.
Just how the unit differs from existing efforts is vague.
The mission sounds similar to the existing task force that was designed to have different offices and enforcement agencies share information on investigations into financial fraud, and to hold market players responsible for their roles in the 2007-2009 financial crisis. It has few marquee prosecutions to its name.
"I'm a little puzzled by it," said Neil Barofsky, a former federal prosecutor who served as the special inspector general of the Troubled Asset Relief Program (TARP) and worked with the 2009 task force. "Here we are three years later, launching what seems like a very similar effort, except now co-headed by a state attorney general."
"Does it mean they haven't really been working on investigating the causes of the financial crisis for the last three years?" he said. "Or is it a statement that the last three years of investigating done by this Department of Justice has been ineffectual and needs to be reworked?" (Reporting By Aruna Viswanatha in Washington D.C. and Karen Freifeld in New York; Editing by Tim Dobbyn)
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