Foreclosure Accord With Banks Said to Ensure Same Terms for All 50 States
Lenders including Bank of America Corp. and JPMorgan Chase & Co. and state attorneys general agreed to ensure that states signing a nationwide accord on foreclosures will be entitled to improved terms won later by states that opt out, two people familiar with the matter said.
California Attorney General Kamala Harris is one of the highest profile attorneys general to publicly balk at the settlement, saying she won’t sign a deal that blocks investigations into mortgage loans.
New York Attorney General Eric Schneiderman, who last week declined to say whether he would sign the deal, yesterday sued Bank of America, based in Charlotte, North Carolina, New York- based JPMorgan and Wells Fargo & Co. (WFC) in state court in Brooklyn over the use of a national mortgage database that the state claims led to improper foreclosures.
The agreement to grant so-called most-favored nation status comes in the endgame of a probe that began in 2010 following claims of widespread foreclosure wrongdoing by mortgage servicers. States have until Feb. 6 to accept the agreement with the five largest servicers, which also include San Francisco- based Wells Fargo, New York-based Citigroup Inc. (C) and Detroit- based Ally Financial Inc. The deal, said to be worth as much as $25 billion, will settle allegations the banks used faulty or forged documents to seize homes from borrowers.
California’s Share
Without California, the value of the deal may sink to $17 billion, said one of the people. Both declined to be identified because the negotiations aren’t public.
The most-favored nation provision would only kick in under certain thresholds, said a third person familiar with the matter who also didn’t want to be named because the talks aren’t public.
All 50 states announced an investigation into bank foreclosure practices in October 2010. A group of state attorneys general and federal officials have since negotiated terms of the settlement, which would set standards for how banks conduct foreclosures while providing mortgage relief to borrowers.
Harris has said she won’t sign a deal blocking her from investigating whether the five largest mortgage servicers misled homeowners about the terms of their loans.
Delaware Attorney General Beau Biden also has concerns about the scope of the liability releases that would be given to the banks, according to his office.
Nevada’s Questions
Nevada Attorney General Catherine Cortez Masto wrote on Jan 27 to Iowa Attorney General Tom Miller and Housing and Urban Development Secretary Shaun Donovan seeking details on the settlement so she could evaluate it.
Schneiderman was selected by the Obama administration last week to help lead a joint state and federal group probing misconduct in the packaging and sale of residential mortgage- backed securities.
The term “most favored nation” is used in international law to specify that countries given that status are ensured that no other country will receive better trading terms. If so, the same benefits must be conveyed to all other trading partners with that designation.
To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net
To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; John Pickering at jpickering@bloomberg.net
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