Virginia is among “at least a dozen” U.S. states that don’t back a proposal submitted last week to resolve a nationwide probe of foreclosure and mortgage-servicing practices, Virginia Attorney General Kenneth Cuccinelli said.
There isn’t consensus among all 50 state attorneys general about the terms of the settlement proposed to U.S. banks, Cuccinelli, a Republican, said today in a telephone interview.
“When some attorneys general found out what was being agreed to, they had a great degree of unease over it,” Cuccinelli said. He declined to name which states, aside from his own, were opposed to parts of the plan.
Federal agencies and state attorneys general last week delivered a 27-page settlement proposal to the country’s five largest mortgage servicers that would set standards for conducting foreclosures and servicing loans.
The terms would force procedural changes on the servicers, including banning companies from initiating foreclosure proceedings while a loan modification is pending, providing borrowers with a single point of contact, and informing borrowers of denied modifications in writing.
Borrowers who are enrolled in a trial loan modification under a federal program and make three loan payments on time would get a permanent loan modification, under the proposal. The document would give attorneys general and the Consumer Financial Protection Bureau responsibility to police servicers’ compliance with any settlement.
The proposal would impose documentation requirements on banks that go beyond Virginia law, Cuccinelli said. A “major problem” is that government-owned mortgage companies Fannie Mae and Freddie Mac aren’t involved in the negotiations, he said.
“They’re going to be a factor here, and to not include them is just not acceptable to me,” he said.
Iowa Attorney General Tom Miller, a Democrat, in a March 7 press conference mentioned principal reductions agreed to by mortgage investors in the 1980s farm crisis.
“The compromise to modify loans in the right situation is economically very much in the interests of investors and owners,” said Miller, who is helping to lead the foreclosure investigation.
Cuccinelli said he opposes principal reductions.
“That sounds like a welfare discussion, not a regulatory discussion,” he said. “That’s not the appropriate role for attorneys general.” He said some states could propose an alternative plan.
Geoff Greenwood, a spokesman for Iowa’s Miller, had no immediate comment.
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