We learned on Friday that Eric Schneiderman’s suit against MERS and three banks using MERS represented a carve-out on the final foreclosure fraud settlement. There was speculation, stoked by HUD Secretary Shaun Donovan, that other states might have carve-outs or grandfathered suits, so they would be able to pursue those investigations and prosecutions and still join the settlement. But Bloomberg reports today that some states with active lawsuits would have to settle them as part of the deal.

The accord, which must be approved by a federal judge, will allow banks to take steps toward resolving mortgage liability stemming from the housing bust. The releases protect them from legal claims tied to foreclosures, mortgage-servicing and origination of loans, said another person familiar with the deal [...]

The settlement, meanwhile, would also require Massachusetts, Nevada and Arizona, which have sued banks involved in the talks, to settle those cases, one of the people said. Nevada and Arizona each sued Charlotte, North Carolina-based Bank of America over mortgage-servicing practices, accusing it of misleading consumers, while Massachusetts sued all five banks that are part of the proposed deal.

Arizona joined the Nevada suit against BofA over their deceptions after the Countrywide deal. I don’t think the state’s Attorney General, Republican Thomas Horne, will have much of a problem settling those claims. But for Catherine Cortez Masto and Martha Coakley, this would be huge.

Remember what we’re talking about in these suits. Masto sued BofA over a wide range of deceptive practices in servicing. This doesn’t say anything about Masto’s case against LPS, a document processor, which includes criminal indictments for robo-signing. But that case was a classic effort to go up the chain to get back to the banks who authorized the abuses. Coakley’s suit is more straightforward, essentially suing the banks for, under Massachusetts law, stealing homes. These suits would have to basically be voided, folded into the settlement, under the terms of the deal. That’s a tall order.

Masto and Coakley have not said whether they would join the settlement. Beau Biden of Delaware thus far looks to be the only AG who is definitely out.

Meanwhile, here’s what activists are saying:

The agreement is “beyond fixing,” said George Goehl, executive director of National People’s Action, a network of community organizations which advocates for fair lending and affordable housing.

“People are very disappointed in what this is going to be both in terms of dollars and release of claims,” Goehl said in a telephone interview. “We’re giving away the store.”

Today is the deadline for states to sign on to the settlement.