As I mentioned in last night’s roundup, New York Attorney General Eric Schneiderman abruptly cancelled a conference call yesterday 10 minutes before it was to begin. The subject was supposed to be the foreclosure fraud settlement, and there was idle speculation that Schneiderman would announce that he would join the settlement. This would spur other holdouts to join, presumably, and at the very least break the somewhat united front against the settlement. You’d probably be looking at a formal announcement within days. But instead, Schneiderman cancelled, postponing the call “indefinitely.”
It looks like the issue is the lawsuits against MERS and three banks that he filed on Friday. The banks want him to drop it.
One person familiar with the negotiations said several banks wanted Schneiderman to withdraw a suit he filed on Friday against prominent financial firms, saying they had acted deceptively by filing erroneous and fraudulent foreclosure documents through a popular electronic mortgage registry designed to allow firms to save time and money by bypassing local property recording requirements. The person spoke on the condition of anonymity because the talks were ongoing. It was unclear whether Schneiderman had intended on Tuesday to address the status of those lawsuits during the news conference.
Schneiderman is working with bank lawyers to find a way to join the settlement and continue the lawsuit, but the banks see this as Schneiderman having his cake and eating it too. They feel that the lawsuit against the banks’ use of MERS is in an area covered by the settlement.
Tom Miller and the leadership pushing for the settlement insist that they will go forward without Schneiderman, if need be. But they keep pushing back the deadlines; the new one is Thursday. In addition, all four of the “sand” states – California, Florida, Arizona and Nevada – have not signed onto the deal. You cannot have a foreclosure deal where the four states with the most foreclosures have not signed on. These states are either looking for side deals to guarantee a minimum amount of relief for their constituents, or in the case of Nevada and possibly California, are concerned about the liability release and the need to drop investigations and lawsuits. We also have our first official “No,” from a Republican who probably thinks the penalty for foreclosure fraud should be a thank-you note delivered to the banks:
One state, Oklahoma, has officially declined to participate, according to one of the persons who said a national settlement could come as early as Thursday. Representatives of the state’s Republican attorney general, E. Scott Pruitt, did not respond to requests for comment.
Some hard-hit states did make their support public on Tuesday. Michigan Attorney General Bill Schuette, for example, said in a statement he was joining the settlement.
Meanwhile the White House is in full-court press mode on this deal, urging outside groups to either support it or remain neutral, in an attempt to defuse attacks and splinter the opposition.
As ongoing administration initiatives to assist distressed homeowners have fallen short and Mr Obama confronts a Congress that has been unwilling to provide for additional aid to troubled borrowers, a settlement that yields fresh relief for the financially strapped represents the White House’s best chance to convince sceptical voters that it is attempting all it can to help the ailing US property market.
Garnering support and minimising criticism from left-leaning organisations sympathetic to borrowers’ plight in advance of the settlement’s announcement will be key, said participants in the White House discussions and separate settlement negotiations.
This isn’t entirely true. It’s hard to follow all the creative accounting, but there is anywhere between $20 billion and $35 billion left in HAMP accounts that has yet to be tapped. That’s potentially as much as, if not a lot more than, the settlement will call for in principal reduction. And if the Administration would replace Ed DeMarco and find a FHFA director who takes the long view on conservatorship, they could do a ton on housing policy with Fannie and Freddie. Clearly the Administration knows this, that’s why they’ve been proposing a host of new housing policies in the hopes that Fannie and Freddie will sign on.
So the settlement isn’t a “last shot.” Unless you look at it from the perspective of the AGs. It’s a last shot for them to get real accountability and justice for these particular fraud incidents, before they release the banks from liability.