A possible settlement of a 50-state probe of foreclosure practices drew more state scrutiny as Nevada’s attorney general joined three other states in voicing concern about a deal that protects banks from continuing mortgage investigations.
Nevada Attorney General Catherine Cortez Masto, whose office sued Bank of America Corp. (BAC) and is conducting civil and criminal foreclosure probes, said she will be “very cautious” about agreeing to a settlement that hinders those inquiries.
“If it’s impacting my ongoing litigation and any other future litigation or current investigation, I’m going to be cautious about whether to sign on or not,” Masto said yesterday in a phone interview.
State and federal officials are negotiating a settlement with the five largest mortgage servicers, including Charlotte, North Carolina-based Bank of America and New York-based JPMorgan Chase & Co. (JPM), over their servicing and foreclosure practices.
A person familiar with the matter said last month that banks want liability releases that cover other areas of their mortgage operations besides servicing, including the bundling of loans into securities.
Dan Frahm, a spokesman for Bank of America, said the bank shares Masto’s goal of helping homeowners.
“Bank of America has been a cooperative partner with the Attorney General, and has worked with state leaders to evolve programs and resources to broaden assistance to distressed customers,” he said in an e-mailed statement.
Tom Kelly, a JPMorgan spokesman, declined to comment.
Masto joined New York, Delaware and Massachusetts in resisting broad releases for the banks in any settlement. Those states are conducting their own investigations into mortgage practices of banks.
Massachusetts Attorney General Martha Coakley said in a letter last month that she won’t sign on to an agreement if it includes “a comprehensive liability release” for mortgage securitization or conduct related to a mortgage database called MERS.
State attorneys general and federal agencies including the Justice Department haven’t reached an agreement with the banks about the releases, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who is leading negotiations for the states in the nationwide probe. Greenwood declined to comment about how individual state investigations may be affected.
Iowa Attorney General
“We’re working with state attorney generals, our federal partners and the banks on resolving the liability issue,” he said.
Masto said her office is conducting inquiries into “various areas of mortgage fraud.” She declined to provide details or say which companies are under investigation. The office has a civil investigation into mortgage securitization, she said.
In its lawsuit against Bank of America, the state accused the bank of misleading homeowners about modifying their mortgage loans to reduce their payments. The case was filed in December in state court in Las Vegas and moved to federal court in Reno, Nevada.
Nevada claimed that the bank violated the state’s deceptive trade practices act by misleading consumers with false assurances that their homes wouldn’t be foreclosed on while requests for modifications were pending, inaccurate and deceptive reasons for denying modifications, and false promises that modifications would be made permanent if homeowners successfully completed trial modification periods.
Masto said she wants to continue to investigate her claims and pursue the lawsuit.
“At the end of the day, whether we’ll be part of it or not will be based on what’s in the best interests of the people here in Nevada,” she said about a nationwide settlement over foreclosure practices.
Like Masto, New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden are investigating mortgage securitization. Biden said in an interview last month that he has “strong reservations” about a deal that provides releases beyond servicing because servicing is the focus of the nationwide settlement talks.
“I hesitate to release those claims and those potential liabilities mostly because we’re still in the midst of investigating many of the other related issues,” he said.
Schneiderman’s office said in a statement that he “remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.”
The case against Bank of America is State of Nevada v. Bank of America, 11-00135, U.S. District Court, District of Nevada (Reno).
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