OKLAHOMA CITY (Legal Newsline) - Oklahoma Attorney General Scott Pruitt is defending his decision not to join a multistate agreement between other state attorneys general and the nation's five largest banks.
Pruitt, a Republican, said he was concerned the national settlement's terms would have consequences for community banks and that the deal didn't include Fannie Mae or Freddie Mac.
"We had concerns that what started as an effort to correct specific practices harmful to consumers, morphed into an attempt by President Obama to establish an overarching regulatory scheme, which Congress had previously rejected, to fundamentally restructure the mortgage industry in the United States," the attorney general said in a statement Thursday.
On Thursday, federal officials and 49 state attorneys general announced a $25 billion agreement was reached between them and the five banks -- Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., Ally Financial Inc. and Bank of America Corp. -- after months of negotiations.
The settlement is one of the largest civil settlements ever obtained by the nation's attorneys general -- second only to their 1998 settlement with the tobacco companies.
The multistate deal, which only covers those mortgages held by the five banks, institutes new protections for homeowners and nationwide reforms to mortgage servicing standards.
It also still leaves the door open for legal remedies for mortgage-related misconduct.
The probe, which began in October 2010 with inquiries into so-called "robosigning" practices, later broadened into identifying and addressing additional alleged improper foreclosure practices.
It was then that Pruitt sent a letter to Iowa Attorney General Tom Miller, who headed up the settlement negotiations, voicing strong concerns that such a multistate deal overreached the authority of state attorneys general.
Pruitt also warned Miller that the deal's terms created questions of fundamental fairness and justice by rewarding homeowners who stopped paying their mortgages, over families who continued to make payments even if they were underwater on their loans.
Pruitt said he fears -- and warned Miller -- that the settlement's structure might end up encouraging more homeowners to default on their loans so they can benefit from the deal.
That's why the attorney general said he opted out of the nationwide agreement -- the only state to do so.
Instead, Pruitt said Oklahoma has reached its own, independent mortgage settlement with five servicers.
The attorney general said his state's settlement requires five banks -- Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and GMAC -- to pay Oklahoma a total of $18.6 million in compensatory damages to resolve claims of unfair and unlawful practices.
"Oklahoma is fortunate to have a stronger housing market and economy than many other states that are struggling," he said.
"This settlement will provide damages to those Oklahomans who did fall victim to unfair and unlawful misconduct of mortgage servicing companies, while not exceeding the appropriate role and authority of state attorneys general."
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.