Calfornia attorney general explains decision to leave mortgage settlement talks
Andrew Edwards, Staff Writer
San Bernardino Sun
Posted: 10/04/2011 03:56:03 PM PDT
State Attorney General Kamala Harris said Tuesday she left national settlement talks with lenders over potential mortgage and foreclosure violations because she doesn't expect a deal will provide enough compensation for troubled California homeowners.
"I do not believe that the total number of Californians who are in foreclosure would be eligible for relief," Harris said in a conference call with reporters.
Harris also said she was concerned that a deal would allow lenders to escape civil, or even criminal, penalties for alleged wrongdoing.
"This action is about a law enforcement action, with the goal of bringing the best and broadest relief we can bring," she said.
California's attorney general first announced her decision to leave settlement talks on Friday. The negotiations have taken place for 11 months and have involved legal authorities from all 50 states and the federal government on one side, and large U.S. mortgage servicers on the other.
A settlement could have resolved claims of faulty mortgage and foreclosure practices, including document fraud known as "robo-signing," in which mortgage servicers approved foreclosure documents without actually reading them.
Representatives of two banks involved in the talks, Bank of America and JP Morgan Chase, declined to comment.
A Wells Fargo spokesman said she could not speak specifically to Harris' actions or remarks, but also said that Wells Fargo's participation in loan modifications and mortgage workshops demonstrates the bank's willingness to aid troubled homeowners.
"We're going to continue to work with all parties, most importantly our customers," Wells Fargo spokeswoman Vickee J. Adams said.
Wells Fargo has agreed to some 700,000 loan modifications since 2009, she said.
By leaving the settlement talks, Harris clears the way for her office's Mortgage Fraud Strike Force to press its own investigations of lending and foreclosure practices.
An investigation could lead to civil or criminal filings against lenders, depending on the evidence, Harris said.
A state investigation could examine robo-signing-related allegations, as well as other possible fraud at the loan origination stage.
Lenders could also meet with California officials for a separate settlement, Harris said. She wants any deal to include provisions for loan principal reductions and lowered interest rates.
California, along with Nevada, Arizona and Florida, has experienced some of the worst effects of the Great Recession and post-2007 housing market collapse.
Harris' office provided statistics showing 1.2 million Californians have lost homes to foreclosure since 2008, and 800,000 more are expected to receive foreclosure notices by next year.
Recent statistics showed that although foreclosure activity remains below last year's levels, an increasing number of homeowners are at the beginning of the foreclosure process.
Statewide, default notices climbed nearly 55 percent in California from July to August, according to RealtyTrac, an Irvine-based property listing firm.
San Bernardino County and Los Angeles County default notices respectively spiked by roughly 55 percent and 60 percent over that period.
Nationally, the San Bernardino-Ontario-Riverside area has been the fifth-most afflicted area in terms of foreclosure activity, Harris' office reported.
Among metropolitan areas with more than 200,000 people, only the Las Vegas, Modesto, Vallejo and Stockton areas have had a worse experience.
Aside from the Las Vegas and Reno areas, the country's ten metropolitan areas with the most foreclosure activity are all in California.
Harris is the first state attorney general to leave the national settlement talks, but officials in other states including New York, have expressed reservations about the potential deal.
A settlement is expected to include provisions to aid homeowners and compensate people who were improperly foreclosed upon.
Iowa's attorney general has taken a lead role in settlement talks. That state's assistant attorney general, Patrick Madigan, said a deal could still be presented to all 50 states.
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