The national mortgage-servicing settlement that isn’t

So … how soon is soon?

For the past four weeks, the National Mortgage Settlement website — erected Feb. 9 by state attorneys general amid a flood of press releases and photo-ops with President Obama — has promised that the actual terms of the settlement with the nation’s five biggest banks and mortgage servicers are “coming soon.”

One month later, however, the specific details of that alleged agreement still have not been revealed to the public, much less brought before a federal judge for the requisite consent order.

Veteran negotiators emphasize that the real-world legal effect of any agreement boils down to its final wording. Absent that text — and no matter how much political razzmatazz — the so-called settlement remains unsettled.

Breathless anticipation of some kind of wonderful global settlement has marked the talks between the Obama administration, state attorneys general and the major mortgage-servicing banks right from the beginning. Just one month after the talks were launched in October 2010, sources were telling Reuters that the banks and attorneys general were “nearing a settlement.”

Notably, the characterization from the banks this Feb. 9 was much more sober. Constrained by SEC regulations, statements issued by both CitiGroup and Bank of America emphasized that all that actually existed was an agreement in principle.

One disagreement still roiling the talks appears to be quite fundamental: the scope of the release from prosecution that banks and mortgage servicers want from state attorneys general and federal regulators.

On the one hand, a press release from Nevada Attorney General Catherine Cortez Masto indicated that under the settlement her office can still criminally prosecute mortgage servicers.

On, however, the first paragraph of the “Release of Claims” section of the proposed settlement’s “executive summary” states:

The proposed Release contains a broad release of the banks’ conduct related to mortgage loan servicing, foreclosure preparation, and mortgage loan origination services. Claims based on these areas of past conduct by the banks cannot be brought by state attorneys general or banking regulators. (Emphasis added.)

Masto, however, denies that such comprehensive language applies to her office.

“Nevada was not involved in the preparation of the information posted on the website,” she told Nevada Journal by e-mail. The website, she said, is hosted by the “Executive Committee of the multistate working group who are party to this settlement.”

“With regard to the release overall,” she wrote, “it’s a release limited to civil servicing, state civil origination claims and civil foreclosure practices. Liability for criminal violations was not released. States can pursue criminal actions against those responsible for these areas of past conduct.”

Even President Obama, in his own Feb. 9 statement hailing the “landmark” nature of the alleged settlement, cast doubt on its “settled” status. 

“This settlement also protects our ability to further investigate the practices that caused this mess,” he boasted, adding that, “working closely with state attorneys general, we’re going to keep at it until we hold those who broke the law fully accountable.”

Yesterday, a source near the talks said bank executives are complaining that New York Attorney General Eric Schneiderman is still going after claims against the banks that are already covered under the agreement in principle.

So fundamental questions about the terms of any final settlement remain.

And while housing and banking industry publications continue to regularly receive reports that release of the final language is imminent, even if that language were to emerge today, still larger questions of paramount importance would remain.

The very length of the settlement negotiations — at least 16 months as of this date — shows that the issues being contested clearly have serious implications for the future of America’s banking and housing industries, and thus for the entire national economy.

But even more is at stake.

As millions of homeowners — whether foreclosed-upon or merely underwater — increasingly realize, the central American principle of equal justice under law is at risk. And, with it, ultimately, the future of freedom.

In coming installments, this series will examine, among other topics:

  • Nevada Attorney General Catherine Cortez Masto’s high profile in the nation’s housing-litigation wars;
  • What Masto’s lawsuits reveal about the politically inflammatory but legally weak issues of robo signing and document “forgery”;
  • How contradictory political goals hamstrung Obama administration efforts over the last three years to deal with the housing/banking crisis;
  • How that same conflict produced what TARP Special Inspector General Neil Barofsky called the “colossal failure” of the administration’s flagship, $75 billion Home Affordable Modification Program, which actually damaged many Nevadans who participated;
  • How the 50-state talks have been a “Hail Mary,” designed to do for the administration politically what HAMP had failed to do; and
  • How regulatory failure has actually been built into U.S. housing and banking policy from the beginning of the 20th Century.

Update (3/12/12): The terms of the National Mortgage Settlement were released today.  You can read more about it here.

Steven Miller is the managing editor of Nevada Journal, a publication of the Nevada Policy Research Institute. For more in-depth reporting, visit and

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