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There's still a lot to do to address mortgage crisis, Schneiderman says

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State Attorney General Eric Schneiderman says the $25 billion national settlement on the foreclosure crisis reached last week is a "down payment," on what he believes banks owe foreclosed homeowners. And he says there's a lot still to do, including civil and criminal prosecutions.

Schneiderman says New York mortgage-holders could see their debt cut by more than $700 million less, under the settlement.

The deal applies to Bank of America, JP Morgan Chase, Wells Fargo, Citibank and Ally Financial. Martha Foley has more.

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Reported by

Karen DeWitt
NYS Capitol Correspondent

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Schneiderman says any homeowner who owes more to one of those banks than his or her home is worth, should expect the bank to get in touch:

"The banks under this deal have an obligation to contact every underwater homeowner in the US, and we know there are thousands in the NC, and try to renegotiate the mortgage."

About 118,000 homeowners in the state are underwater and Schneiderman says he expects many will be able to reduce either the amount they own on their homes, or the interest rate they’re paying.

And many whose banks foreclosed on them between 2008 and 2011, will also get checks for $1500-$2000.

The settlement means state Attorneys General can’t bring civil lawsuits against the banks for what have been called robo-signing cases. But Schneiderman says that doesn’t mean he, and private homeowners, can’t sue the banks for other reasons:

"We carved down the immunity banks get in return for the [payments] to a narrow set of issues. So the good news is this provides some relief, and the better news is it preserves [AG’s] rights to go after the banks for much more relief, and it preserves the ability of all homeowners to seek relief."

Critics have said the settlement is too narrow to make a real difference in the economy, and that the cash payouts are too small. And they’ve pointed out that the settlement doesn’t cover mortgages from the government financing agencies Fannie Mae or Freddie Mac, which account for about half the nation’s home loans.

But Schneiderman says as co-chair of a task force set up by President Obama, he’s begun probing “pre- (market) crash conduct” in the financial industry, including the bundling of mortgage securities, for possible fraud. 

“Markets are supposed to be football game, not a street fight,” said Schneiderman. “There are rules, there are lines.”

He says this is just the beginning:

"We’re working with all the fed agencies that have the resources and jurisdiction, to go after the banks for the more egregious misconduct, the stuff that actually blew up the economy. We’ve got to make sure everyone’s doing their job, and that the banks are held accountable at the end of the day, and that we get a much more significant package of relief for homeowners when that investigation is concluded."

New York will receive $136 million in the settlement—Schneiderman says he plans to use the money, in part, to fund legal services for homeowners looking to "face off" with lenders.

 

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