Bank Releases in Any Foreclosure Deal Opposed by Massachusetts Official
By David McLaughlin – Jul 26, 2011 12:01 AM ET
Massachusetts Attorney General Martha Coakley said the state won’t sign on to any settlement of a nationwide foreclosure probe that includes certain liability releases for banks, joining officials in at least two other states who have raised concerns over terms of a possible deal.
The banks in settlement talks with state and federal officials are seeking broad releases to protect them from legal claims. Massachusetts Attorney General Martha Coakley said yesterday she won’t support an agreement that includes releases for securitization of mortgages and conduct related to a database of mortgages known as MERS.
“Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct,” Coakley wrote to the Norfolk County register of deeds in Dedham, Massachusetts. “These investigations must continue.” The registry keeps real estate records.
State and federal officials are negotiating a settlement with the five largest mortgage servicers, including Bank of America Corp. and JPMorgan Chase & Co., over their servicing and foreclosure practices. Attorneys general from all 50 states began investigating the practices last year. The banks want releases that go beyond servicing to include lending and securitization of loans, according to a person familiar with the matter.
Spokesmen for Bank of America and JPMorgan declined to comment about the issue last week. They didn’t immediately respond to e-mails seeking comment yesterday.
Last week, Delaware Attorney General Beau Biden said in an interview that he had “strong reservations” about releasing claims other than for servicing of mortgages because he is investigating related issues, including securitization.
New York Attorney General Eric Schneiderman’s office said in a statement last week that he “remains concerned by any settlement agreement that would preclude state attorneys general from conducting comprehensive investigations of the mortgage crisis.” Schneiderman is conducting his own investigation.
In a telephone interview yesterday, Coakley said her office is investigating MERS, which was created by the mortgage finance industry and tracks servicing and ownership interests in mortgage loans. Coakley said she is looking into whether MERS complies with Massachusetts law. At issue is the integrity of real-estate transfers, she said.
“We’re not prepared to do a broad liability release for either securitization issues or for MERS until we’ve completed that piece of investigation,” she said.
Other states in addition to New York, Delaware and Massachusetts have concerns about the scope of the liability releases included in any settlement with the five mortgage servicers, Coakley said. She declined to name the states. Banks are looking for the broadest releases possible in any settlement, Coakley said, and the issue is “under intense discussion.”
Merscorp Inc., which owns MERS, will cooperate with the Massachusetts investigation, Janis Smith, vice president of corporate communications, said in an e-mailed statement.
“The use of MERS has been litigated in Massachusetts courts, and judges have upheld the legality of the MERS business model in the commonwealth,” Smith said.
Coakley said she disagreed with that view.
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