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AG Settlement Will Not Release Banks From Securitization Liability

As state attorneys general and major U.S. banks continue to work toward a settlement, questions abound regarding the amount of legal liability the servicers should and will maintain after an agreement is signed.

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The two groups have been working toward a settlement regarding robo-signing and other improper actions by the servicers since the beginning of the year.

According to a widely referenced article in the ""_Financial Times_"":http://www.ft.com/intl/cms/s/0/3602091a-d7e0-11e0-a5d9-00144feabdc0.html Tuesday, one of the recent drafts of the settlement while ""explicitly stat[ing] that the release does not include securitisation claims,"" has ""language is broad enough in that it could prevent state officials from bringing securitisation claims in the future should they sign up to the agreement.""

In the same article, the _Financial Times_ reported, ""State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful

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securitisation practices, according to five people with direct knowledge of the discussions.""

However, Geoff Greenwood, a spokesperson for Iowa Attorney General Tom Miller told DSNews.com Tuesday, ""We do not intend to release securitization.""

Miller is head of the executive committee of attorneys general working on the settlement and a key member of the negotiating committee.

Furthermore, in a response last week to ""New York officials' concerns"":http://dsnews.comarticles/ny-delegates-respond-to-ags-removal-from-settlement-committee-2011-08-30 about the proceedings of the settlement after the ""removal of New York Attorney General Eric Schneiderman"":http://dsnews.comarticles/ny-attorney-general-accused-of-undermining-settlement-2011-08-24 from the executive committee, Miller stated:

""While a final multistate case release has not been negotiated and the release is a work in progress, attorneys general on the Negotiating Committee are not preparing to, nor will they agree to, release the banks from all civil liability. We are also not preparing to, nor can we agree to, release the banks from any criminal liability.""

In other developments, ""HUD"":http://portal.hud.gov/portal/page/portal/HUD recently completed its investigation into robo-signing practices and has shared its findings with the attorneys general executive committee, according to ""_American Banker._"":http://www.americanbanker.com/

""We have gathered information through state and federal sources, and we have a very clear picture of the extent of these practices,"" Greenwood told DSNews.com, adding that information from all sources has been ""very helpful.""

The negotiating committee and the banks will likely meet again later this week, but there is no clear indication yet as to when the groups will reach a final settlement.