WASHINGTON (Legal Newsline) – A settlement between the nation’s top mortgage servicers and state attorneys general looks closer to being done.
More than 40 states have already signed on to the proposed settlement agreement, enabling the parties to move forward into the final stages.
Rhode Island Attorney General Peter Kilmartin is one of a handful of attorneys general who have publicly come out in support of the newest proposed settlement.
The deal, which would cover only those mortgages held by the five banks — Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., Ally Financial Inc. and Bank of America Corp. — is said to lower nearly 1 million homeowners’ mortgages by about $20,000 and provide for payments of $1,800 to those harmed by the banks’ lending practices.
“The proposed agreement will provide direct relief to Rhode Island homeowners and address future mortgage loan servicing practices,” Kilmartin said in a statement Tuesday.
“Iowa Attorney General Tom Miller’s office issued a statement last evening indicating that more than 40 states signed on to the proposed settlement agreement, enabling the parties to move forward into the very final stages of remaining work. Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement.”
The proposed deal, Kilmartin said, seeks to provide immediate relief to struggling homeowners, bring “badly needed” reform to the mortgage servicing industry, ensure that foreclosures are lawfully conducted and penalize the banks for past misconduct.
He said the settlement does not grant any immunity from criminal offenses and will not affect criminal prosecutions.
“It does not prevent homeowners or investors from pursuing individual, institutional or class action civil cases against the five servicers,” Kilmartin said. “The settlement also enables those state attorneys general with jurisdiction and federal agencies to investigate and pursue other aspects of the mortgage crisis, including securities cases.”
However, the attorney general noted that the deal is “only one of many steps” in a “comprehensive, nationwide solution.”
Also Tuesday, Missouri Attorney General Chris Koster said he is giving “preliminary support” to the multistate agreement.
Koster said he believes that the two sides have made “substantial progress” and are nearing agreement.
Not at liberty to disclose the full terms of the settlement, the attorney general said his state could receive in excess of $40 million in direct payments from the banks and in excess of $100 million in additional benefits to Missouri homeowners.
Should the negotiations come to a “productive conclusion” in the coming days, Koster said he will sign the agreement on behalf of Missouri.
“My intention is to settle this portion of the State’s case against the banks, returning more than $100 million directly to mortgage holders in our state and adding tens of millions of dollars to the state’s general revenue fund in these difficult economic times,” Koster said in a statement.
Last week, Oregon Attorney General John Kroger announced he also plans to sign on to the deal.
But there are some attorneys general who are not so sure.
On Monday, Nevada’s Catherine Cortez Masto said her office is continuing to review the “intricate” draft settlement terms and advocating for improvements to address the state’s needs.
“Receipt of important state specific information is necessary to make our determination and my office is still in discussions regarding that information,” said Masto, who started her own comprehensive investigation into the mortgage industry.
Meanwhile, New York Attorney General Eric Schneiderman, who has been highly critical of the nationwide talks, called off a press conference at the last minute Tuesday.
According to The Washington Post, Schneiderman was expected to announce his support for the deal.
Talks between the state attorneys general, federal officials and the five banks have dragged on for months now.
The probe began in October 2010 with inquiries into so-called “robosigning” practices, and has since broadened into identifying and addressing additional alleged improper foreclosure practices.
Forbes’ Daniel Fisher, in a column Tuesday, drew a comparison between the mortgage settlement and the Tobacco Master Settlement Agreement.
The MSA was struck in 1998 between the nation’s largest tobacco companies and the attorneys general of 46 states.
The states settled their Medicaid lawsuits against the industry for recovery of their tobacco-related, health-care costs, and also exempted the companies from private tort liability regarding harm caused by tobacco use.
The mortgage settlement is headed in the same direction, Fisher says.
“In both cases, the AGs are seizing upon behavior which looks bad and may technically violate the law, but is hard to link directly to consumer injuries,” he wrote.
Some of the blame, Fisher argues, falls on the shoulders of those borrowers who simply didn’t pay their mortgages.
“As with tobacco, the AGs are attacking a tragedy with many causes by going after the least popular actors in the drama. It’s good theater, but hard to see how beating up on the processing companies will prevent housing prices from finding their natural bottom,” he wrote.
“That will only occur when the economy recovers and a new wave of buyers bids on houses now occupied by people who can’t afford what they agreed to buy at the peak of the bubble.”
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.