Will California re-join the mortgage settlement process?
Will the state attorneys general ever ink a settlement with top banks and loan servicers over fraudulent mortgage practices?
The negotiations have stretched on for so long now that they are becoming an afterthought. Some people have given up hope for a global deal, after the likes of New York, California and few others have withdrawn their support for the process being led by the Iowa AG. Just recently an effort was made to woo California to re-join the rest of the states. The key issue is the extent to which banks are granted liability from states seeking legal redress for various practices. The current proposal would require banks to pay an additional $5 billion to refinance mortgages--on top of a federal deal that called for $20 billion for this purpose.
In exchange, the state would agree not to pursue mortgage origination allegations. It may be that California decides that the focus now should be on helping underwater homeowners. There are plenty of people who think that the state would be giving up too much to the banks. But after investigating origination issues in the state, AG Kamala Harris may decide that homeowners would be better off with the speedy refinancing support. The other states argue that there will still be plenty of room for additional investigation by the states.
We'll have to see how this shakes out. In any case, the fact that we do not have settlement yet is yet another reflection of just how hard it is proving to unwind the real estate mess.
- here's an LA Times article