(h/t Calculated Risk)
Details of Mortgage Servicing Settlement Between Banks and AGs Begin to Emerge
By Massimo Calabresi, Time Magazine
December 23, 2011
In return for the $5 billion in cash and the $20 billion in credits, the banks would be released from claims against them for servicing and foreclosure abuses that might be brought against them by the states and the federal government. The states also release the banks from origination claims, that is, claims they might face for all the fraud and duplicity they engaged in when they made bad loans at the height of the housing craze. The banks do not get immunity or a release of for individual claims by homeowners-just a release from past practices State- and Federal-initiated claims. They also don’t get released for securitization abuses of the kind Citibank and Goldman Sachs have been investigated for.
The Iowa AG’s office, which led the negotiations, is bracing for criticism of the deal. The limited payments are likely to be criticized, as is the release for origination abuses. The state negotiators say all the originators are already out of business and that in most cases the claims would be too old to prosecute. Arguments over what the banks would and wouldn’t get off the hook for are what led several liberal State AGs to bolt from the deal. The $25 billion version of the price tag drops to $19 billion if California stays out of the deal, which looks likely. Other states that have dropped out have been in talks with Housing and Urban Development chief Shaun Donovan about coming back into the fold: in particular, Donovan has been in talks with New York State Attorney General Eric Schneiderman in recent weeks in the hope of getting him back into the deal, but that also seems unlikely.