Well, the deadline for state Attorneys General to sign on to the foreclosure fraud settlement came and went yesterday, and the major holdouts – the Justice Democrats, the AGs from the five states who have objected to the settlement all along (Nevada, New York, California, Delaware, and Massachusetts), still aren’t signed on.

Catherine Cortez Masto (NV) remained undecided by the close of the day. Beau Biden (DE) went on Dylan Ratigan and voiced his opposition yesterday afternoon, saying that he wouldn’t sign anything that impeded his ability to pursue cases against MERS, with the option of adding banks that used MERS to the suit. Martha Coakley (MA) has not responded, and Kamala Harris (CA) and Eric Schneiderman (NY) have not yet signed the deal.

Iowa AG Tom Miller, the nominal head of the 50-state investigation (but whose authority has been completely usurped by the federal regulators) announced yesterday that “more than 40 states” have agreed to the terms of the deal. But these five holdouts – and more, like Republican Thomas Horne of the foreclosure-ravaged state of Arizona, a co-signee to Masto’s Bank of America lawsuit – probably can hold up the announcement of a settlement until they get better terms.

One of the major issues now is that banks want to retrade the deal and void out the lawsuit Schneiderman just announced last Friday against MERS and three banks:

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. made a last-minute demand that New York drop claims filed against them Feb. 3 as a condition of the settlement, a person familiar with the matter said.

The push by the three banks raised a new obstacle in getting Schneiderman’s support for the deal, said the person. New York, along with California, Nevada and Delaware said late yesterday they hadn’t signed on to the settlement.

New York sued Bank of America, JPMorgan and Wells Fargo in state court in Brooklyn, saying their use of a mortgage database known as MERS led to improper foreclosures. Schneiderman said the banks’ use of the Mortgage Electronic Registration Systems database misled homeowners, undermined foreclosure proceedings and created uncertainty about ownership interests in properties.

I guess that lawsuit did not, to the banks’ eyes, represent a carve-out from the deal. Just like suits in Massachusetts and Nevada, the banks want that suit folded into the settlement. And Biden’s statement that he wants to preserve his MERS suit and the ability to expand it would similarly meet with disapproval from the banks, one would think. MERS, for its part, offered a weak response to the Schneiderman lawsuit yesterday. It amounts to “what we do is OK.” I guess that’s what the courts are there to decide.

If the banks want a lawsuit just filed on Friday to be thrown out, I’m not sure how Schneiderman can sign on; it looks like a dealbreaker. And this would set a precedent for other states to preserve their already filed claims (and there’s more on that today out of Missouri, which I’ll get to in a future post).

All of the Justice Democrat AGs appear to be negotiating for better terms in the deal. California wants additional control over how to deliver relief to homeowners, for example.

California’s Harris has expressed concern that relief provided in the settlement go to those “most distressed” in her state, and has pressed for some certainty that the relief is regionally proportionate, according to people familiar with California’s concerns.

As Yves Smith points out, Harris’ contention is also important. “The banks get less credit for modifying loans with LTV ratios of over 175%. Harris appears to object to that. That may prove to be a serious bone of contention.”

I suppose the feds could settle for a 40-plus state deal, without New York and California. But that’s been the sticking point all along. Really only a handful of states have objected to this settlement by any measure. And they’re still objecting, or at least bargaining.