Washington, DC -- Throwing NYS Attorney General Eric Schneiderman off an executive committee negotiating a nationwide settlement with the nation’s largest banks over dubious foreclosure practices is wrong said Congressman Eliot Engel.

AG Schneiderman was taken off an executive committee of state Attorneys General negotiating a nationwide settlement with the banks because he wanted a better settlement than was on the table with the banks.

A central issue in the negotiations between the banks and the 50 states is how broad a release from future legal claims these banks should receive in exchange for agreeing to overhaul their mortgage servicing practices and paying tens of billions of dollars in penalties.

Banks like Bank of America, Citigroup, JP Morgan Chase and Wells Fargo are looking to strike a deal with state prosecutors across the country that would preclude further litigation.  For a cash settlement of somewhere around $20 billion, which would mostly go toward paying for loan modifications, these banks would be able to wipe their slates clean.

Rep. Engel said, “I joined in signing a letter from members of the New York Congressional Delegation protesting Iowa Attorney General Tom Miller’s removal of AG Schneiderman from the committee. Mr. Schneiderman is absolutely right in wanting to defend New York and other states in future litigation. These banks were reckless in issuing dubious mortgages, then packaging them for resale to Fannie Mae, who bundled them for further resale to individual investors.

“In effect, it didn’t matter to banks if they were making loans to unqualified borrowers because there were no real consequences for the banks if the borrowers defaulted.”

These banks and other financial institutions received about $1.2 trillion in loans from the Federal Reserve.  That’s as much as homeowners across the country owe on 6.5 million delinquent and foreclosed mortgages.  The banks were made whole, but not the homeowners.

Rep. Engel said that AG Schneiderman has insisted that a hasty settlement could let banks off too easily. He said, “Schneiderman wants a more comprehensive investigation into all aspects of the mortgage crisis, followed by a larger settlement that would bring relief both to struggling homeowners and large institutional investors who bought mortgage-backed securities that turned out to be worthless.  He has also said that any settlement should not release banks from liability for mortgage-related misdeeds committed before the financial crisis. I agree wholeheartedly with this. Eric Schneiderman should be reinstalled on the committee immediately.”

Text of letter follows:

August 25, 2011

The Honorable Tom Miller

Attorney General

1305 East Walnut Street

Des Moines, IA 50319

Dear Attorney General Miller:

As members of the New York congressional delegation, we are united in fighting for a fair resolution of the housing crisis that has devastated tens of thousands of families across our state.  That is why we are deeply troubled by your recent action to silence New York’s voice by removing New York State Attorney General Eric Schneiderman from an executive committee negotiating a nationwide settlement with the banks.  We strongly urge you to reconsider your decision.

New York’s homeowners and investors have been hit hard by the economic impact of wrongdoing related to the mortgage crisis.  According to the FBI, New York ranked as one of the top ten states for known or suspected mortgage fraud activity for two consecutive years.  It also was one of the top ten states for reports of mortgage fraud across all originations in 2010.  Undoubtedly, our state, the third largest in the nation, deserves a seat at any negotiating table that could potentially limit our state’s ability to investigate and penalize wrongdoing done within our borders.   

Raising legitimate concerns about elements of the proposed settlement is a responsibility of every member of the executive committee and should never be the basis for silencing a viewpoint.  Your removal of Attorney General Schneiderman sets a dangerous precedent for other attorneys general who, out of fear of what might happen, may choose silence over voicing valid concerns with particular aspects of the proposed settlement.  Moreover, your attempt to banish opposition rather than address varying viewpoints undermines both the validity of the process and any settlement reached by the committee.

New York deserves representation on the executive committee.  We strongly urge you to reconsider your decision so that New York may have adequate representation during the remainder of the mortgage settlement negotiations.

Sincerely,

Eliot Engel

Timothy Bishop

Gary Ackerman

Joseph Crowley

Maurice Hinchey

Nita Lowey

Carolyn Maloney

Carolyn McCarthy

Charles Rangel

Jose Serrano

Louise Slaughter

Paul Tonko

Edolphus Towns

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