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Mortgage Deals With Banks Backed by Virginia’s Cuccinelli

April 6 (Bloomberg) -- Virginia Attorney General Kenneth Cuccinelli, a critic of a proposal by other states to settle a probe of mortgage practices, approves of separate settlements between U.S. banks and federal regulators, his spokesman said.

The largest U.S. mortgage servicers began signing agreements with federal regulators, including the Office of the Comptroller of the Currency, to improve procedures after investigations found the companies conducted foreclosures without proper review or complete documentation, two people with direct knowledge of the negotiations said.

The settlements come as the attorneys general of the 50 states were growing divided over what to seek from the banks. Cuccinelli and six other Republican attorneys general had criticized settlement terms put forth last month by some their counterparts as overstepping state authority.

“The AG is in favor of the federal regulators such as OCC reaching separate settlements with mortgage lenders regarding federal regulatory matters,” Brian J. Gottstein, a spokesman for Cuccinelli, said today in an e-mail. “We do not have to wait for some joint federal-state settlement. The quicker all this gets resolved, the better for consumers and the economy.”

The states can reach their own agreements with the banks on matters that fall under state authority, he said.

Idea Outlined

In a March 22 letter to Iowa Attorney General Tom Miller, a Democrat who has taken the lead in the 50-state probe, Cuccinelli and the attorneys general of Texas, Florida and South Carolina opposed a proposal to reduce principal balances. That idea was outlined in the terms Miller submitted to the top U.S. mortgage-servicing companies on March 3.

Miller, in an e-mailed statement from his office, said state attorneys general will continue to work with other federal agencies, including the Justice Department and the Treasury Department, and that an OCC settlement “will not affect our investigation.”

“The settlement neither preempts, nor impacts our efforts,” Miller said.

Scott Pruitt, Oklahoma’s attorney general, last month wrote Miller his own letter, co-signed by counterparts in Nebraska and Alabama, criticizing principal reductions.

The National Association of Attorneys General is set to meet in North Carolina next week to discuss financial fraud protections. Pruitt will attend the meeting, according to his office. Cuccinelli won’t, Gottstein said.

To contact the reporters 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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