"As CAP Warned, State Attorneys General’s Mortgage Servicing Investigations Threaten To Unravel Over Infighting"
Our guest blogger is Alon Cohen, a housing policy consultant for the Center for American Progress.The Center for American Progress warned in April 2011 that banks’ quiet settlements with federal regulators over mortgage servicing fraud concerns could spell doom for similar state AG investigations. We noted that a federal settlement could stall state attorney general talks as banks asked for time to implement the settlement terms, risking delay and fractures in the AG coalition.
The fractures would weaken the AGs’ bargaining position and could even derail a settlement altogether. Unfortunately, we may have been right. Talks in April occurred around a rumored $20 billion fine. A month later, the number dropped to $5 billion amid news of defections.
Yesterday, Iowa AG Tom Miller removed New York AG Eric Schneiderman from the lead negotiating group, claiming that he has “actively worked to undermine” the settlement. This is only the latest in a series of high profile rifts that include AGs from Florida and Massachusetts.
At this point, don’t expect an AG settlement any time soon or with any significant monetary penalty or with serious reforms required beyond what was already in the settlements with Office of the Comptroller of Currency, Office of Thrift Supervision, and FDIC. Of course, there has been no report of any significant changes coming from those settlements either.