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Kamala Harris CA Withdrawal 10.1.11
Kamala Harris CA Withdrawal 10.1.11
Kamala Harris CA Withdrawal 10.1.11
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News, Quotes, Companies, Videos Saturday, October 1, 2011 As of 12:00 AM New York 66 | 52
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California Attorney General Kamala D. Harris pulled out of settlement negotiations with the nation's biggest banks over alleged foreclosure abuses, calling the proposed deal "inadequate for California homeowners." The decision by Ms. Harris delivers a serious blow to efforts by the Obama administration and 50 state attorneys general to forge a $25 billion settlement with the nation's largest banks over "robo -signing" and other questionable foreclosure practices. Her actions follow the withdrawal of New York from the talks. Without the participation of California and New York in the negotiations, banks will be far less likely to agree to the multibillion dollar settlement that federal and state officials have spent months pursuing. California remained a critical constituent for any deal because it has more borrowers who are underwater, or owe more than their homes are worth, than any other state. California also has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida. The move by Ms. Harris, who took office in January, comes after 11 months of oftenfrustrating negotiations between big banks such as Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc. Representatives for the three banks declined to comment. A spokeswoman for Ally Financial Inc., the
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fifth-largest mortgage servicer and parent of GMAC Mortgage, called the decision "disappointing for borrowers in California" who are in financial distress.
One key point of contention has been the extent to which banks should be released from additional legal claims involving the mortgage crisis in exchange for signing onto the foreclosure settlement. In recent months, other states, including Delaware, Massachusetts, Nevada, Minnesota and Kentucky, have also expressed concerns over the scope of any settlement. Some states and critics of the banks argue that officials haven't done a thorough investigation of other potential improprieties.
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10/1/2011
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In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, Ms. Harris said her decision to break off from the group was driven in part by those two key concerns. "It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated," she said.
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House Is Gone but Debt Lives On
She added that "the relief contemplated would allow too few California homeowners to stay in their homes." Ms. Harris also cited a recent "troubling surge in foreclosures," which
had plummeted in the wake of the robo-signing scandal. In a statement, Mr. Miller called California "an important part of our team" but said that the states "fully expect to reach a settlement with the banks." A Justice Department spokeswoman said that discussions would continue "to ensure that the banks are held fully accountable for their actions." The split highlights a broader disagreement between some government officials involved in the negotiations. The Obama administration has argued that a settlement could help provide immediate benefits to borrowers, while creating certainty for the housing market. "We are 100% focused on providing relief to homeowners while it can still make a difference and save homes from foreclosure," said Mr. Miller. "Providing relief after the foreclosure crisis is over would be a hollow victory indeed." Friday's decision by California wasn't completely unexpected. As the talks have dragged on, political pressures have mounted, with both sides expressing unhappiness with any deal. Conservatives denounced the settlement as a "shakedown" of banks, while labor unions and liberal political groups warned of a bank giveaway. Ms. Harris and other Democratic state attorneys general have faced intense lobbying from different factions, including critics who want the states to hold out for a bigger deal and the Obama administration, which has shepherded the deal. A spokesman for Ms. Harris said the attorney general made her decision based on "the evidence and the merits of the deal, not other considerations." The loss of California dims the Obama administration's push to force banks to write down loan balances as part of any settlement. Even if the remaining states and federal agencies reach a deal, it is likely to cover far fewer borrowers as the price tag drops. The settlement talks were prompted by so-called robo-signing, where bank employees signed off on hundreds of loans a day and falsely claimed they had personally reviewed documents to give the bank the right to foreclose. The mess deepened as judges raised questions about how banks documented their ownership of loans and whether financial firms fabricated other paperwork. Regulators have found what they said are widespread weaknesses in mortgage-servicing operations. Over the past year, banks have sharply slowed down foreclosures. Foreclosure delays have been most pronounced in "judicial" states where banks must foreclose on borrowers by going before a court. California allows foreclosures through a non-judicial process. Regulators and banks say they have uncovered very few cases where borrowers entered foreclosure without missing payments. But the crisis has exposed numerous cases where banks couldn't prove they had the right to take back homes or where borrowers believed they were receiving loan modifications, only to lose their home. The unraveling of any settlement also raises the prospect that banks will face separate legal action from a handful of state attorneys general. Ms. Harris traveled to Washington last week for a meeting with banks and state negotiators in an effort to resolve her concerns. She said that her office will continue to investigate questionable mortgage practices and will push for additional legislative and regulatory reforms. This year, she announced the creation of a "mortgage fraud strike force" to study all stages of mortgage lending, from origination to the servicing of troubled loans to the packaging of loans into securities. Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com
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10/1/2011