California has withdrawn from settlement negotiations between the 50 state attorneys general and the nation's top servicers regarding robo-signing and other foreclosure-related violations.
California's Attorney General Kamala Harris says, ""Good progress has been made, particularly with respect to identifying common-sense reforms to mortgage servicing and foreclosure practices."" However, the current proposed settlement is ""inadequate for California homeowners,"" Harris states in her letter Friday announcing her withdrawal from the negotiations.
The effect Harris's action will have on the overall settlement is yet to be seen. As the state with the highest incidence of defaults, California has been a significant participant so far.
Harris met with Iowa Attorney General Tom Miller and the banks in Washington, D.C., about a week before she formally withdrew from the negotiating team.
It was after this meeting that she says ""it became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated.""
Harris specifically mentions that California has the highest rate of default, 2.2 million underwater homeowners, and ""a troubling surge in foreclosures"" in the past two months.
Harris plans to move forward with her own independent investigation on behalf of struggling Californians.
Meanwhile, Miller - head of the attorneys general investigation - admits in a statement released Friday that ""California has been an important part of our team."" However, ""the multistate effort is pressing forward, and we fully expect to reach a settlement with the banks,"" Miller adds.
A spokesperson for Miller said he was not surprised by Harris's decision as she had addressed her concerns in D.C. and told Miller of her decision prior to sending her formal statement.
Miller says he and the remaining attorneys general aim to reach a timely settlement that would aid homeowners ""while it can still make a difference and save homes from foreclosure.""
""Providing relief after the foreclosure crisis is over would be a hollow victory indeed,"" he states.
California is the second state to officially withdraw from the settlement.
Another state that was once a key player in the negotiations and one of the original members of the executive committee of attorneys general is no longer participating.
New York Attorney General Eric Schneiderman was removed from the executive panel working toward a settlement with the banks after Miller accused him of working to ""undermine"" the negotiations.
Schneiderman had outwardly opposed any settlement that precludes individual state investigations and legal action regarding previous foreclosure practices.
In addition, while they have not formally resigned from settlement negotiations, several other states have addressed similar concerns: Delaware, Kentucky, Massachusetts, Minnesota, and Nevada.
Regardless of whether a state participates in the negotiations or not, each state will have the opportunity to sign onto the final settlement, according to a spokesperson for Miller.
While a final settlement has not been reached, a spokesperson for Miller told DSNews.com the negotiating committee does not plan to release the banks from all civil liability.