Several of the nation’s attorneys general have been working on forging a settlement with the nation’s biggest banks over the banks’ role in the foreclosure fraud scandal that broke a few months ago. The banks were found to have systematically violated due process when approving foreclosures, including employing “robo-signers” to sign off on thousands of foreclosures per day.
The leaders of the settlement talks have proposed having the banks pay up to $20 billion for their mortgage misdeeds, with the money going toward reducing mortgage loan principal for troubled homeowners. (Reducing principal is the most sustainable form of loan modification.) However, several Republican attorneys general have balked, siding with the banks, which have lobbied against having principal reductions be part of the settlement deal.
Virginia Attorney General Ken Cucinelli (R), for instance, said principal reductions are akin to “welfare.” So far, eight Republican attorneys general have publicly opposed including principal reductions in the settlement deal. But Georgia Attorney General Sam Olens (R) said yesterday that up to 20 attorneys general may take the banks’ side in this negotiation:
[Olens] estimated that as many as 20 of his colleagues are opponents. “While one AG may want to use it for principal writedowns, other AGs may use it for different methodologies to assist their constituents,” Olens said yesterday at meeting of state top legal officers in Chicago. [...] At least eight attorneys general, including Olens, Texas Attorney General Greg Abbott and Florida’s Pam Bondi, have publicly opposed principal writedowns as part of any deal.
A report from the International Monetary Fund showed that the effect of more aggressive loan reductions on bank balance sheets “is likely to be limited,” and several of the banks involved in the settlement discussions are back to making sky-high profits. But instead of pushing to aid homeowners who were pushed into housing distress through no fault of their own, Republican AG’s are taking their cues from the banks. Olens, in his last election campaign, received $195,000 from the financial services industry, making it his second largest contributor.