Oklahoma Considers Own Accord With Banks on Foreclosures

Oklahoma Attorney General Scott Pruitt, a critic of proposed settlement terms stemming from a 50-state foreclosure investigation, may break off to seek an alternative accord with banks.

Pruitt’s office is conducting its own investigation and may negotiate a separate settlement if state and federal officials leading the nationwide probe reach a deal that forces banks to pay for reductions of loan balances for borrowers.

“If there is a direction the national settlement goes that is inconsistent with our conviction, we have an option available to us that could still represent the interests of Oklahomans,” Pruitt said today in a telephone interview.

Pruitt is among at least eight Republican attorneys general who have criticized a federal-state settlement proposal submitted last month to five mortgage servicers, including Bank of America Corp. (BAC) The 27-page document was offered to start negotiations with banks as part of an investigation into foreclosure and mortgage-servicing practices.

In an e-mailed statement earlier today, Pruitt’s office said he instructed his staff to “craft a settlement that is specific to Oklahoma’s concerns of punishing bad actors while respecting the appropriate role of attorneys general.”

“This alternative to the current proposed term sheet could provide other states with a model to consider,” according to the statement.

Criticized Terms

Attorneys general in Florida, Texas, Virginia, South Carolina, Nebraska, Alabama and Georgia have also criticized terms that call for a loan-modification program involving principal reductions.

In a March 16 letter to Iowa Attorney General Tom Miller, Pruitt said forcing lenders to reduce mortgage balances would take away incentives for banks to loan money and “destroy an already devastated housing market.” Miller is leading the negotiations for the states.

Since writing the letter, Pruitt said there has been “more open discussion” about whether the nationwide settlement should include principal reductions.

“It’s a process that’s more reflective perhaps now of concerns that many of us have,” he said in the interview. “It remains to be seen where we end up but as part of that I think it’s good policy for me in this office to engage in a very specific inquiry about our state.”

Geoff Greenwood, a spokesman for Miller, declined to comment.

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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