Feds To Sell Out Homeowners? Begin Arm-Twisting Campaign, Targeting NY AG, Others To Seek Support For Crappy, 50-State Foreclosure Fraud Settlement

The New York Times reports:

• Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.



• In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.



• Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.



• But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.


• Not surprising, the large banks, which are eager to reach a settlement, have grown increasingly frustrated with Mr. Schneiderman. Bank officials recently discussed asking Mr. Donovan for help in changing the attorney general’s mind, according to a person briefed on those talks.

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• [A recent NY AG] lawsuit [to block a proposed $8.5 billion settlement involving the peddling of crappy mortgage-backed securities] angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public.



• Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City. The New York Fed has supported the proposed $8.5 billion settlement.



• Other investors in the Countrywide mortgage pools who were not part of the settlement talks between Bank of New York Mellon and Bank of America have called the terms inadequate.



• Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”



• Mr. Schneiderman declined to comment on the encounter.

For more, see Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal.

See also, Editorial: It's A Flawed Settlement:

• The Obama administration has turned up the heat on Eric Schneiderman, New York’s attorney general, to go along with a proposed settlement with the nation’s largest banks over dubious foreclosure practices.



• Mr. Schneiderman should stand his ground in not supporting the deal. The administration says that a settlement would quickly deliver much needed relief to hard-pressed borrowers, but it’s doubtful it would provide redress on a par with the banks’ wrongdoing or borrowers’ needs.