So Eric Schneiderman’s team is a little upset with me, I assume, over this post. I can only assume that, because I haven’t had any direct contact. But indirectly, I’ve heard accusations of “misinformation and outright misrepresentations” lodged at me. I guess I’m not on the good guys team to get a phone call anymore. Ah well.

Nevertheless, gracious sort that I am, let me allow Schneiderman’s office to explain themselves, without a filter. Here’s the set of talking points passed my way that lays out what happened and where we go from here. I’m happy to post this in full without alteration. I’ll be back at the end for a few comments.

What the MERS agreement does?

• Required multistate settlement release to explicitly carve out all of AG’s claims in the pending MERS suit against Chase, Wells, and Bank of America, as well as similar claim that may be asserted in the future against Citi and Ally.

• AG agrees to not pursue certain monetary claims (primarily penalty claims under NY General Business law) in exchange for payment of $25 million in cash. (The allocation of the payments among the 5 banks is set forth in Para. 5 of agreement.)

• The agreement is not part of the multistate settlement. The banks chose to submit the agreement to the DC Court because it has some relationship to the multistate agreement, in that it narrowed the claims NY was releasing.

What the MERS agreement does not do?

• AG still may pursue claims for damages suffered by borrowers, homeowners, or consumers as a result of illegal conduct alleged in the MERS suit. There is a very narrow exception – the State may not recover damages if the only evidence it can ultimate show of unlawful conduct is “robo-signing,” a very small portion of the MERS suit which focuses primarily on other foreclosure-related practices.

• AG may still pursue injunctive relief against banks (i.e., court order directing banks to reform ways they use MERS system, stopping illegal and deceptive foreclosure filing practices, including filing foreclosure actions where party lacks authority to sue, and directing banks to take all necessary actions to cure any title defects and improper liens resulting from illegal and deceptive practices). The only “injunctive relief” the AG agrees not to pursue is a court order specifically vacating foreclosure judgments already entered into before MERS suit was filed – relief that the AG did not ask for in the suit and did not intend to seek.

• AG may still pursue declaratory relief against banks and obtain a court decision that the practices alleged in the complaint violate the law.

• AG did not release any claims against MERSCORP, Inc., including penalty claims. The banks own MERSCORP and thus may indirectly be responsible for penalties imposed against MERCORP.

Why the settlement is good for New York?

• New York obtains an additional $25 million that can be used help distressed homeowners in NY. By getting this money now as opposed to years from now in a court judgment, we can help people now.

• Initially, New York could not join the multistate agreement and receive the $107 million and benefits for homeowners (i.e., loans mods, refinancing, etc.) and pursue the MERS suit because the types of claims raised against the banks in the MERS suit are waived by other states. We were able to successfully negotiate a path to obtain the benefits of the multistate agreement while still being able to pursue the MERS lawsuit claims against the banks – something no other state can do because they released these claims. (except Delaware which negotiated a substantially similar agreement but current has no pending lawsuit against the banks targeting MERS-related conduct)

• There are substantial legal restrictions on how much penalties we could recover from the banks. First, the legal cap on penalties is $5000 per violation. Second, we only could obtain penalties going back 3 years to Feb. 2009 – the pace of foreclosure filings dramatically dropped starting in late 2010. Taking into account these very real legal restrictions, receiving $25 million is a very good deal.

• We can continue to pursue the primary goals of the MERS lawsuit: a) obtaining a court order directing the banks and MERS to stop engaging in illegal practices and dramatically reform their conduct; b) obtaining a court order requiring the banks and MERS to take all remedial actions to resolve any title problems created by their prior illegal practices (i.e., clean up the mess they made); and c) obtaining a court ruling declaring the practices set forth in the complaint illegal.

OK, that’s their argument. Fair enough. I never said it was a full settlement, and mentioned that Schneiderman can still pursue claims for damages suffered by borrowers. It’s interesting that the language used here — “clean up the mess they made”– mirrors the language in the Jeff Thigpen suit just released.

I guess I have a few questions. One, if the constraints on the suit as far as penalties were well-known, why engage in that part of the suit? Two, if the suit was always meant to be forward-looking, what will constitute the evidence to get MERS to change their practices? Three, if MERSCORP, a shell corporation, declares bankruptcy as a result of its legal exposure, how do you expect to ever acquire penalties?

I have more questions, but my hope is that there can be a dialogue on these issues rather than a dictation. And ultimately, I’m going to look to results to guide my opinions on Schneiderman and his relative success. Given not only the outcome of this lawsuit, but the relative quiet of the task force, and most important, signing on to a settlement that looks increasingly disappointing, we’re not off to the best start.