California’s Attorney General Kamala Harris has announced she is pulling out of multi-state foreclosure practice negotiations which are currently under way with some of the country’s biggest banks, saying she intends to pursue her own investigations in an attempt to reduce foreclosure numbers and reform bank practices.
Harris, in a letter to the committee, said that any relief contemplated in the deal would be too little for California homeowners, too few of whom would manage to stay in their homes.
The LA Times quoted Harris as saying that instead of the plan mooted by the committee, the onus should be on banks to make mortgages more affordable for struggling homeowners by reducing the principal owed.
Thanks to the size of California and the massive number of foreclosures in the state, Harris may just have the ammunition she needs to force her own deal with the banks, say industry analysts. Her move was welcomed by a number of consumer advocate groups, which had previously claimed the settlement proposed by banks was nothing but a “slap on the wrist”.
One of the most vocal consumer advocates is Rick Jacobs, who is chairman of the Courage Campaign, and he was delighted with the news:
"This is enormous news, bigger than just California news. California is ground zero in so many ways for the mortgage debacle. She is saying, 'We're going to find out what happened and do everything we can to make sure banks help restart the economy by keeping people in their homes.'"
The committee for resolving the foreclosure crisis, made up of all 50 attorneys general, as well as numerous federal officials, has been looking into ways to reform banking practices ever since last year’s “Robo-signing” scandal, which revealed that numerous bank employees were signing foreclosure orders and other documents without even reading the.
It’s been rumored that five of the major U.S. banks – JP Morgan Chase, Bank of America, Citigroup, Ally Financial and Wells Fargo – have been close to a $20 billion settlement for months now.
However, this proposed settlement has come under increasing criticism in recent weeks, with consumer advocates, activists, politicians and labor leaders becoming increasing vociferous in their opposition to the plan, which they claim doesn’t help the victims of their malpractice and lets them off too lightly.
Attorney General Harris had been under considerable pressure from these groups to pull out of the talks.
In addition to Harris, a number of other attorneys general, such as those from Massachusetts, New York, Kentucky, Delaware, Minnesota and Nevada, have also criticized the settlement.