NEW YORK - Eric T. Schneiderman, New York’s attorney general, is under pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, say people briefed on discussions about the deal.
Shaun Donovan, secretary of Housing and Urban Development, and Justice Department officials have been campaigning to persuade the attorney general to support the settlement, the people said. Schneiderman and top prosecutors in other states have said the proposed settlement would restrict their ability to prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.
The administration has been contacting not only Schneiderman but his allies, including consumer groups and housing advocates, seeking help to secure the attorney general’s participation, the people said.
The large banks, eager to settle, are frustrated with Schneiderman’s stance. Bank officials recently discussed asking Donovan for help, said a person briefed on those talks.
Donovan said his discussions with the attorney general were motivated by a desire to speed up help for troubled homeowners. He said he had not spoken to bank officials about trying to persuade Schneiderman.
“The disagreement,’’ Donovan said, “is around whether we should wait to settle and resolve the issues around the servicing practices for him - and potentially other AGs and other federal agencies - to complete investigations on the securitization side. He might argue that he has more leverage that way, but our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market.’’
The possible settlement centers on foreclosure improprieties like so-called robo-signing and submitting apparently forged documents to speed evictions.
A possible settlement emerged in March, with institutions including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo being asked to pay about $20 billion for loan modifications and possibly counseling for homeowners. The attorneys general would have agreed not to litigate further on matters relating to the improper bank practices. The banks balked at the $20 billion; talks seemed to stall as Schneiderman and a others questioned the deal.