The precise size of the deal hinges largely on the participation of California, whose attorney general, Kamala Harris, has called previous proposals “insufficient,” saying that the relief offered would not enable enough of the state’s homeowners to stay put and would “excuse conduct that has not been adequately investigated.” Officials close to the negotiations said Monday that while California has continued to withhold its support, Harris still could sign on to the settlement if several concerns are addressed, including the extent of legal immunity that banks would get and the process for determining which homeowners would receive help.
State attorneys general originally were given a deadline of last Friday to say whether they would support the proposed settlement. That deadline got pushed to Monday. Even then attorneys general from California and Nevada said they were continuing to evaluate the deal and negotiate last-minute changes.
With or without California, the deal is likely to move forward and become the largest industry settlement since a multi-state deal with tobacco companies in 1998.
Still, some liberal groups and consumer advocates have argued that the expected terms amount to little more than a drop in the bucket, given the size of the housing crisis. Millions of homeowners remain either in foreclosure or are badly delinquent on their mortgages, and the pending deal would reach only a fraction of them.
For months, such groups have urged the Obama administration to undertake deeper investigations into mortgage-related misdeeds and to push for a much larger settlement later than rush into a less substantial deal now. The groups also have been worried that officials might let banks off the legal hook with little more than a slap on the wrist.
For instance, the group Campaign for a Fair Settlement issued a statement over the weekend saying it was “deeply concerned” about the push to finalize the current deal. AFL-CIO President Richard Trumka said recently that “a sum significantly larger than the rumored $25 billion is needed,” given the $750 billion in “negative equity” that exists from borrowers who owe more than their homes are worth.
Other housing experts have applauded the administration and state attorneys general for negotiating what they called a meaningful, if admittedly limited, foreclosure settlement.
“Does it go far enough? No. Does more need to be done? Absolutely. Is it a step in the right direction? Yes,” said Ira Rheingold, president of the National Association of Consumer Advocates. “It’s not going to solve all the problems we have right now. There’s a long way to go still to undo all the damage that was done.”