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HUD and Justice Department Seek Support for Servicer Settlement

While New York, Nevada, Massachusetts, and Delaware attorneys general continue to oppose the proposed settlement with the nation's top servicers, HUD and the Justice Department are taking steps to persuade at least one of them to comply.


Both HUD and the Justice Department are specifically asking New York Attorney General Eric Schneiderman to abandon his objections to the claim and approve the settlement, which could preclude him from any further legal action against the servicers, according to a Sunday article in the ""_New York Times._"":http://www.nytimes.com/2011/08/22/business/schneiderman-is-said-to-face-pressure-to-back-bank-deal.html?_r=1&nl=todaysheadlines&emc=tha25

""Our aim is to reach a settlement that holds the banks accountable and helps homeowners who have been wronged. We have reached out to a number of attorneys general to ensure the agreement preserves their ability to pursue other claims not included in this settlement, such as securitization,"" a HUD spokesperson said.

HUD Secretary Shaun Donovan and others in the administration have reached out to Schneiderman and consumer groups opposing the settlement aiming to win Schneiderman's approval, according to the _New York Times._


The proposed settlement for Bank of America, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., and Ally Financial Inc. could require as much as $20 billion from servicers for loan modifications and possibly homeowner counseling. One major sticking point is whether attorneys general would be able to pursue separate claims related to their own individual probes.

""The disagreement is around whether we should wait to settle and resolve the issues around the servicing practices for him [Schneiderman] - and potentially other AG's and other federal agencies - to complete investigations on the securitization side,"" Donovan said, according to the Sunday _Times_ article.

""He might argue that he has more leverage that way, but 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,"" the _New York Times_ quoted Donovan.

Nevada Attorney General Catherine Cortez Masto is in the midst of civil and criminal investigations of Bank of America for illegal foreclosure practices.

According to ""_Bloomberg,_"":http://www.bloomberg.com/news/2011-08-16/bofa-weighs-foreclosure-deal-with-n-y-probe.html Masto would be ""very cautious"" about signing a settlement that would interfere with her own investigations.

In addition to dissention over the immunity clause, attorneys general and the banks have disagreed over whether the servicers should include principal reductions in the settlement. Bank of America recently began considering the provision.

_Bloomberg_ also recently reported that BofA is considering agreeing to the proposed settlement while allowing exceptions for further probes from a few attorneys general, including Schneiderman.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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