July 27, 2021

A Deal on Foreclosures Inches Closer

But a final agreement remained out of reach Monday despite political pressure from the White House, which had been trying to have a deal in hand that President Obama could highlight in his State of the Union address Tuesday night.

The housing secretary, Shaun Donovan, met on Monday in Chicago with Democratic attorneys general to iron out the remaining details and to persuade holdouts to agree with any eventual deal. He later held a conference call with Republican attorneys general. But as he renewed his efforts, Democrats in Congress, advocacy groups like MoveOn.org and several crucial attorneys general said the deal might be too lenient on the banks.

The agreement could be worth about $25 billion, state and federal officials with knowledge of the negotiations said, with up to $17 billion of that used to reduce principal for homeowners facing foreclosure. Another portion would be set aside for homeowners who have been the victim of improper foreclosure practices, with about 750,000 families receiving about $1,800 each. But bank officials said Monday that the total amount of principal reduction and reimbursement would depend on how many states eventually sign on.

The government and bank officials would speak only on the condition of anonymity because the discussions were continuing.

Tom Miller, the attorney general of Iowa, said Monday that an agreement with the nation’s five largest mortgage servicers — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial — would not be reached “anytime this week.”

In a letter to administration officials, Senator Sherrod Brown of Ohio said the settlement as reported — its details were not fully known — was too small and would allow banks to pass on the cost of the settlement to “middle-class Americans” whose pension funds hold soured mortgage securities.

In addition to disagreements over the total amount, negotiations have been held up over the question of how much latitude authorities would have in pursuing investigations into mortgage abuses before the housing bubble burst in 2007. The banks are pushing for a broad release from future claims, but several attorneys general, including prominent figures like Eric Schneiderman of New York and Martha Coakley of Massachusetts, have demanded a tougher line on the banks.

Some state prosecutors have raised concerns that the settlement could prevent them from investigating broader claims.

Others have said that their citizens would be shortchanged if there were no guarantee that the relief would be distributed geographically.

This month, about 15 Democratic attorneys general who shared concerns about the course of the settlement talks met in Washington, including Ms. Coakley, Mr. Schneiderman, Catherine Cortez Masto of Nevada and Beau Biden of Delaware, who is a son of Vice President Joseph R. Biden Jr.

A week after the meeting, Mr. Donovan announced that a deal was “very close.” But none of those four attorneys general attended the meeting on Monday.

Neither did another important holdout, Kamala Harris, California’s attorney general, who opposed earlier proposed agreements.

In a bid to win support from California officials, Mr. Donovan proposed earmarking $8 billion in aid for beleaguered California homeowners, but that left other state attorneys general incensed, according to an official familiar with the negotiations.

“Attorney General Harris has consistently and repeatedly expressed concern about protecting her ability to investigate wrongdoing in the mortgage arena, and that remains a key lens through which she will evaluate any proposals,” her spokesman said Monday.

A spokesman for the Department of Housing and Urban Development declined to comment.

In a statement, Danny Kanner, a spokesman for Mr. Schneiderman, said “any settlement must not shut down ongoing investigations or release claims against the banks that must still be pursued.” Ms. Coakley also promised to continue to pursue her own lawsuit.

Whether California or other large states participate in an agreement will determine how much the banks agree to pay for the eventual settlement, according to bank officials.

Article source: http://feeds.nytimes.com/click.phdo?i=709dafbf9c7a9bd6416866ec5710c0d4

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