Criticism Grows over AG’s Proposed Foreclosure Settlement

August 17, 2011

A proposed settlement with big banks over allegations of fraudulent foreclosure practices, like robo-signing,  is getting more scrutiny and more criticism from Attorneys General around the country.  The fate of the deal appears to be on increasingly shaky ground, with Nevada’s Attorney General now joining those in New York, Massachusetts and Delaware in questioning some of the proposed details.  Although full details about the proposed settlement haven’t been released, it reportedly requires that the AGs provide banks with a broad release from legal claims in state investigations and lawsuits.

American Association for Justice Associate Editor Courtney Davenport just published an article in its Professional Negligence Law Reporter publication about the growing discourse.  In it, she interviews Consumer Warning Network Managing Editor Terry Smiljanich, a former federal prosecutor, who provided a blistering criticism of the proposed deal:

“It’s patently ridiculous. It’s like saying ‘I agree not to rob any more banks, but if I do, you agree not to prosecute me for it,” said Terry Smiljanich of Tampa-based organization Consumer Warning Network. “Everybody is desperate to sweep it under the rug and get it out of the way. The only people with the power to engage in any kind of enforcement measure are the attorneys general.”

State and federal officials are negotiating the proposed settlement with the five largest mortgage servicers, including Bank of America and JPMorgan Chase. The deal with the mortgage companies would broadly absolve the firms of wrongdoing in exchange for penalties reaching $30 billion and assurances that the firms will adhere to better practices going forward, according to an article in the Huffington Post.

The settlement would reportedly release companies like Bank of America and JPMorgan Chase from legal liability in exchange for a cash settlement, reduced payments for homeowners, transition assistance for troubled borrowers and promises to improve performance and comply with state and federal rules.  Here is an early version of the proposed settlement released back in March by the American Banker.

CWN’s Smiljanich told AAJ’s publication that regardless of the settlement’s final terms, it will amount to a “slap on the wrist” for the banks.

“When I saw the settlement standards, I literally started laughing. In essence, they are agreeing to start doing what they should have been doing all along; they are agreeing to start acting a little more honestly,” he said. “That is the sum total of pressure put on them by this settlement.”