N.Y. Lawmakers Protest Schneiderman Mortgage Panel Removal

New York lawmakers sent a letter to Iowa Attorney General Tom Miller saying they were “troubled” by the removal of New York Attorney General Eric Schneiderman from an executive committee of state officials negotiating a nationwide foreclosure settlement with U.S. banks.

“Raising legitimate concerns about elements of the proposed settlement is a responsibility of every member of the executive committee and should never be the basis for silencing a viewpoint,” 21 members of the New York congressional delegation said in an Aug. 25 letter. “Your removal of Attorney General Schneiderman sets a dangerous precedent for other attorneys general who, out of fear of what might happen, may choose silence over voicing valid concerns.”

Schneiderman, who doesn’t want a settlement to bar further investigations of mortgage practices by individual states, was removed because his office “actively worked to undermine” the attorney general group, Miller said last week. Schneiderman had already declined to be part of a smaller committee negotiating with the banks, said Miller, the leader of the attorney general group.

Attorneys general from all 50 states last year announced their investigation into bank foreclosure practices after reports that faulty documents were being used to seize homes.

Negotiated Settlement

Since then, a group of attorneys general and officials from federal agencies, including the Justice Department, have been negotiating a settlement with the five largest mortgage servicers in the U.S.

Miller is reviewing the letter, Geoff Greenwood, the Iowa attorney general’s spokesman, said today. “We anticipate responding later in the week,” Greenwood said.

Miller issued a statement Aug. 23 on Schneiderman’s role.

“From October 2010 until June 2011, New York was intimately involved in every aspect of this investigation and possible settlement,” Miller said in the statement. “In June 2011, our group decided that we needed to take the fairly large executive committee and create a smaller negotiation committee.”

New York declined an invitation to be part of this negotiation committee “because it indicated it would possibly pursue a different direction,” Miller said.

Another Path

“While we certainly respect the right of any state to choose to no longer participate in a multistate and to pursue another path, working to actively undermine a multistate while still a member of the Executive Committee simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said in last week’s statement.

Government officials are seeking an agreement that provides funding for writedowns on mortgage loans for borrowers and sets standards for how the banks service loans, interact with borrowers and conduct foreclosures, according to terms proposed in March.

Several attorneys general, including Schneiderman, criticized any settlement that would protect banks from state investigations by providing the lenders with broad releases from liability. Those probes include the bundling of mortgage loans into securities.

‘Deserves Seat’

New York “deserves a seat at any negotiating table that could potentially limit our state’s ability to investigate and penalize wrongdoing done within our borders,” the congressional delegation said in the letter to Miller. “Your attempt to banish opposition rather than address varying viewpoints undermines both the validity of the process and any settlement reached by the committee.”

Attorneys general who want to continue their own probes after an agreement are Martha Coakley in Massachusetts, Delaware’s Beau Biden and Catherine Cortez Masto in Nevada. Delaware is also a member of the executive committee.

The companies involved in the talks are Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Ally Financial Inc.

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; 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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