Monday was the deadline for states to sign onto a deal hammered out with big mortgage companies to settle a litany of fraud charges.

More than 40 states have agreed to the deal, but the effort to get California and New York back in the fold--which would make the deal that much more definitive and crisis-ending--has created some new problems. Recall that New York Attorney General Eric Schneiderman, a bitter critic of the settlement, sued three banks and MERS recently, even as it emerged that he was reconsidering his decision not to sign on to the settlement. Bloomberg now reports that the three banks have issued a last minute request that the New York AG drop its suit.

I seriously doubt that that’s going to happen. California has also been pushing for more favorable terms, as a condition for it to return to the fold. As the deadline expired, California was said to be in heated discussions to resolve the final issues. One major stumbling block, according to the LATimes, is California's concern that the deal would “release the large servicers from legal action, including violations of state laws, for issues that had not been thoroughly investigated, including securities probes related to losses sustained by the California Public Employees' Retirement System, the nation's largest public pension fund.”

At this point, it’s unclear if either New York or California can be satisfied.

For more:
- here’s the LATimes article
- here’s the Bloomberg article

Related articles:
California, New York might sign on to settlement
New York sues 3 big banks and MERS