It looks like Iowa Attorney General Tom Miller won't be getting his Christmas wish this year. Miller, who is leading the settlement talks with the top five mortgage servicers, said earlier this month that the settlement should be reached by the holiday.
But as the negotiations continue, and news reports about last-minute haggling emerge on a daily basis, it seems less likely that a deal will be announced this week — and less clear what the final deal will really look like.
The major players in this ongoing saga are the same, but it's still unclear where they stand. All eyes are on California, where Attorney General Kamala Harris continues to weigh that state's participation in the agreement. Harris dropped out of the settlement negotiations in September, when she sent a letter to Miller saying the deal under discussion was "inadequate for California homeowners."
Harris's announcement followed similar moves from attorneys general in New York and Massachusetts, and effectively killed any chance of a multistate settlement, sources said at the time. AGs in Delaware and Nevada have also raised concerns about a potential deal.
Miller, however, has said California may still participate, and insisted a deal will come together even if the state does not sign on to the final agreement. The dollar value could be as high as $25 billion, but would drop significantly, to about $19 billion, if California does not participate.
As for the banks, the settlement would involve the top five mortgage servicers: Bank of America, Wells Fargo & Co., JPMorgan Chase, Citigroup, and the government controlled Ally Financial/GMAC. But the five – which control 63.77% of the housing receivables market – have yet to sign on to any final agreement.
Although the details are still being ironed out, the settlement dollar value would pay for principal write-downs and interest rate deductions for certain borrowers. The agreement would also put in place new servicing standards, which officials have said they hope to align with the standards imposed by banking regulators through consent orders with the 14 largest mortgage servicers.
Sources on both sides have said they are mostly in agreement over servicing standards. Talks had stalled over the summer on the issue of future lawsuits, specifically whether the banks will be released from liability for past servicer-related misconduct.
Banks had sought releases relating to mortgage securitization — something New York Attorney General Eric Schneiderman and others strongly opposed.
But a new wrinkle emerged last week when reports surfaced that the banks were also seeking assurances from the Consumer Financial Protection Bureau that it would release them from liability related to mortgage origination.
The agency dropped out of any talks on the settlement in the spring, after documents revealed that CFPB officials had spoken with state officials about the settlement. The industry accused Elizabeth Warren and the bureau of meddling in the negotiations — they suggested it was CFPB that proposed the initial $20 billion settlement amount — and Republicans blasted it for acting without any legal authority. Warren insisted that she merely gave advice to the state AGs when asked.
Since then, the CFPB has not been involved in any settlement negotiations, save for an occasional briefing from federal officials.
