California Pulls Out of Settlement Negotiations with Major Banks

: Chris Lee Law Firm

  Filed under: Financial News

Kamala HarrisThis week, the California Attorney General, Kamala D. Harris, withdrew from settlement negotiations with major banks over alleged foreclosure abuses. Harris removed herself, claiming that the deal was unfair to injured California homeowners. This move significantly damages efforts by the Obama Administration to seal a $25 billion settlement with a number of major U.S. banks over “robo-signing” and other dubious activities related to the foreclosure process.

 

This action follows a similar withdrawal by the representative from New York. Without the support of California and New York—two of the states hardest hit by the economic downturn—experts speculate that bank officials will be far less likely to agree to the settlement. California in particular holds a critical position, because it has more underwater borrowers, or those owing more than the value of their home, than any other U.S. state. The state of California also has more borrowers who are behind on their mortgages or currently in foreclosure than any other state.

Contention Over Bank Liability Continues

California’s decision to pull out of negotiations follows a prolonged debate over the extent to which banks should be released from responsibility related to remaining legal claims involving the mortgage crisis. Other states, including Delaware, Massachusetts, Nevada, Minnesota, and Kentucky, have also expressed concerns. Such states and other critics contend that too little has been done to discover any other potential misbehavior on the part of the banks.

Despite such concerns, representatives of the Justice Department maintain that discussions will continue until it is certain that the banks are held accountable for all actual misdeeds. However, other experts propose that this action on the part of California highlights a deeper rift between government officials. While the Obama Administration supports the idea that a settlement would provide immediate necessary relief to homeowners, others suggest that such a settlement would do little to assuage the actual problems experienced by many Americans.


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