Tuesday, March 15, 2011

Attorney Generals Against Write Downs of Mortgages



Following last week's statement by Bank of America CEO Brian Moynihan that principal reductions are unfair and not in everyone's best interest, more banks and even some attorneys general have spoken out against the controversial clause in the settlement proposal. Wells Fargo CEO John Stumpf voiced his disapproval of principal write-downs, saying such provisions would entice people to default on their loans. Some attorneys generals said they feel write-downs would force servicers to break their contracts with investors.

According to Bloomberg, Virginia Attorney General Kenneth Cuccinelli said there was “a great degree of unease” among the attorneys general regarding the terms of the settlement. Cuccinelli also said he believes it is a problem that Fannie Mae and Freddie Mac aren’t involved in the negotiations.

The news service said Oklahoma Attorney General Scott Pruitt also opposes the settlement, saying that mandatory write-downs would force servicers to violate obligations to their investors.