Banks, States Aren’t Close on Foreclosure Deal, Miller Says

Iowa Attorney General Tom Miller
Iowa Attorney General Tom Miller. Photographer: Andrew Harrer/Bloomberg

Iowa Attorney General Tom Miller said banks and government officials have “a long way to go” to reach an agreement on mortgage servicing and foreclosure practices.

The two sides met in Washington yesterday, less than a month after state attorneys general and federal agencies proposed requirements for how banks handle mortgage-servicing and home seizures.

“I think that we have a long way to go,” Miller said at a briefing with reporters at the Justice Department in Washington. “You don’t expect to accomplish a lot of agreement in a first meeting. That didn’t happen. It was a breaking of the ice in a very constructive way that we hope lays the groundwork for solving the issues in the future.”

The 27-page term sheet by government officials was sent earlier this month to the top mortgage servicers in the U.S. -- Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co., Ally Financial Inc. and Citigroup Inc. Representatives of all five attended the meeting. They didn’t attend the press conference with Miller and Thomas Perrelli, the associate U.S. attorney general.

“It was a useful and productive opportunity to discuss several issues of concern,” Ally spokeswoman Gina Proia said in an e-mail.

JPMorgan spokeswoman Christine Holevas and Wells Fargo spokeswoman Terri Schrettenbrunner declined comment. Mark Rodgers at Citigroup and Bank of America spokesman Dan Frahm didn’t return calls seeking comment.

‘A Ways to Go’

Miller, Perrelli and Delaware Attorney General Beau Biden, who also attended the daylong meeting, declined to comment on specifics of the discussions.

Yesterday’s “discussion was constructive and useful but we do still have a ways to go here,” Biden said in a phone interview after the meeting.

The settlement proposal seeks to force procedural changes on servicers such as banning companies from initiating foreclosure proceedings while a loan modification is pending. It also states that a “substantial portion” of a monetary payment will go toward a loan modification program that includes principal reductions of loans. It doesn’t specify a dollar figure.

“I think everybody recognizes that there are serious problems and serious issues that need to get resolved,” Perrelli said. “I think we’re all trying to take them on head on and to work through them.”

Divisions Over Scope

The proposal has created divisions among state attorneys general over its scope. At least seven attorney generals, including Greg Abbott of Texas and Pam Bondi of Florida, have written Miller about their opposition to some terms, including forcing principal reductions on lenders. That element could encourage homeowners who are paying their mortgages to default, the attorneys general argued.

Oklahoma Attorney General Scott Pruitt said in a phone interview on March 29 that that viewpoint needed to be expressed at the meeting. Any agreement that requires principal reductions is “unacceptable,” said Pruitt, who didn’t plan to attend the meeting.

“There is not unanimity around making this investigation about principal and loan modification,” he said.

Before yesterday’s meeting, banks sent officials an excerpt of their proposal for servicing standards, Geoff Greenwood, a spokesman for Miller said this week.

Separately in Washington yesterday, JPMorgan Chief Executive Officer Jamie Dimon said cutting debt for home borrowers isn’t the solution to the U.S. mortgage crisis.

Principal reduction for people who are able to pay their mortgages is “off the table,” Dimon told reporters yesterday after speaking at a U.S. Chamber of Commerce event. Dimon said the New York-based bank already reduces principal for some borrowers.

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