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New York attorney general gets booted from foreclosure settlement talks

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August 31, 2011

By Lauren Rodgers

New York

Albany, NY: Many of the nation's attorneys general are working to help victims of foreclosure. They have come together, joined by representatives from several federal agencies, to reach some sort of compromise with the five largest mortgage services: Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup, and Ally Financial.

The banks are accused of fraudulent mortgage foreclosure practices, and in these compromise talks have asked for "broad immunity to other state lawsuits that might be brought against them."[1] In exchange, the banks would pay approximately $20 billion which "would go toward loan modifications and possibly counseling for homeowners."[2]

New York Attorney General Eric Schneiderman has stood in opposition to this compromise, and it cost him his seat at the table of the executive team. He was dismissed by Iowa Attorney General Tom Miller and accused of "working to actively undermine" the deal.[3] New York has notoriously tough fraud enforcement laws, and Schneiderman's office is currently opposing an $8.5 billion settlement over bad mortgage-backed securities.[3] Schneiderman has pushed, in deliberations, for states to retain the right to sue: "our ongoing investigation into the housing crisis cannot be shut down to accommodate efforts to settle and give banks and others broad immunity from further legal actions."[1]

The secretary of the national Housing and Urban Development Shaun Donovan, along with representatives from the U.S. Department of Justice, have encouraged Schneiderman to scale back his opposition. "Our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market."[2]

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