Calif. AG urged to reject proposed settlement with banks

By Jessica M. Karmasek | Sep 30, 2011


SACRAMENTO, Calif. (Legal Newsline) -- A group of California union leaders, politicians and activists are calling for state Attorney General Kamala Harris to reject a settlement with the nation's five top mortgage servicers.

Californians for a Fair Settlement sent a letter to Harris, asking that she reject the proposed $20 billion deal, according to the Los Angeles Times.

State attorneys general -- including Harris -- the U.S. Justice Department, Treasury Department and the new Consumer Financial Protection Bureau are in the midst of negotiating a deal with mortgage servicers Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc. and Ally Financial Inc.

The probe began last October with inquiries into so-called "robosigning" practices by several mortgage companies, and has since broadened into identifying and addressing additional alleged improper foreclosure practices.

According to the Times, those who signed the letter include Rep. Maxine Waters, D-Los Angeles; Joshua Pechthalt, president of the California Federation of Teachers; Zenei Cortez, president of the California Nurses Association; Richard Hopson, chairman of the Alliance of Californians for Community Empowerment; and Steve Matthews, executive director of Service Employees International Union Local 721.

The newspaper reported Thursday that Lt. Gov. Gavin Newsom also has joined the group in its call, saying the deal is a "deeply flawed settlement proposal."

The group says the proposed amount, alone, is "outrageous," adding that it wouldn't cover damages for California much less the entire nation.

It also points to the settlement's liability release language, saying it could affect future investigations into lender practices.

The releases have become an issue.

More and more state attorneys general are coming out against them. Kentucky Attorney General Jack Conway was the most recent, last week.

Conway says he opposes any offer of government immunity to the financial institutions.

"We are a little concerned the banks may not be taking us seriously," Conway told the Louisville Courier-Journal. "We want them to know if they don't come up with an agreement we are going to take some actions."

Delaware Attorney General Beau Biden and Massachusetts Attorney General Martha Coakley both have said they would hesitate signing a deal that could protect the banks from continuing mortgage investigations.

Nevada's Catherine Cortez Masto has said she was going to be "cautious" about whether to sign a settlement with the five banks, especially if it could impact her state's own litigation.

New York Attorney General Eric Schneiderman has argued that servicing is at the center of the proposed deal with the banks.

Last month, Schneiderman, who is currently doing his own comprehensive investigation into the mortgage industry, was removed from the committee negotiating a nationwide settlement with the lenders.

Iowa Attorney General Tom Miller, who is leading the committee, said Schneiderman "actively worked to undermine" its effort.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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