SACRAMENTO, Calif. – California Attorney General Kamala Harris said Friday that she will not agree to a settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major U.S. banks.
Her announcement is the latest to undermine a settlement that had been in the works between the banks and attorneys general in all 50 states. Other states including New York also have expressed reservations.
The agreement was supposed to settle claims of poor mortgage and foreclosure practices, including document fraud known as "robo-signing" — approving documents in foreclosures without actually reading them.
However, Harris said the pending deal is "inadequate for California homeowners" and gives bank officials too much legal immunity.
The state is being asked as part of the settlement "to excuse conduct that has not been properly investigated," she wrote, promising to continue her own investigation.
Without agreement from the nation's most populous state — and one of the hardest hit by foreclosures — the settlement could end up doing little to resolve the issue. Foreclosure fraud class-action lawsuits are also piling up against major banks across the country.
Harris noted that more than 2.2 million California residents are underwater, meaning they owe more on their mortgages than their homes are worth. Since negotiations began 11 months ago, foreclosures have begun against more than 560,000 additional California homes.
"No state has been harder hit than my home state of California," Harris wrote in a letter to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the talks. "Recently, at the same time that we have been negotiating in good faith, foreclosures in California have surged again."
Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. are among the banks that have been involved in the talks to compensate borrowers whose homes were improperly foreclosed upon.
JPMorgan Chase spokesman Thomas Kelly and a Bank of America representative declined to comment on Harris' letter. A Wells Fargo representative did not immediately return a call seeking comment.
Harris said California will go it alone in negotiating a settlement with the banks that would keep more families in their homes. She also promised to seek regulations and legislation to prevent future problems.
Assistant Iowa Attorney General Patrick Madigan said California had been an important part of the negotiations, which already have had lasting effects, delaying foreclosures in many states.
"However, the multistate effort is pressing forward and we fully expect to reach a settlement with the banks," he said in a statement. The settlement will still be presented to all 50 states, he said.
States need to move quickly to prevent more foreclosures, Madigan said.
"Providing relief after the foreclosure crisis is over would be a hollow victory indeed," he warned.
Community organizations praised Harris for rejecting the settlement.
"The first step in restarting our economy is keeping people in their houses and holding banks' feet to the fire," Rick Jacobs, chairman and founder of the Courage Campaign, said in a written statement.
"This settlement would have only been able to help around 20,000 California homeowners out of 2.2 million, while giving away all future rights to pursue investigations and litigation around a broad list of fraud that has been committed," said a news release from People Improving Communities Through Organizing.
Banks' responses to the scrutiny have varied.
Many, including Bank of America and Ally Financial Inc.'s GMAC Mortgage, temporarily halted their foreclosure cases in October after allegations surfaced that employees signed but didn't read documents that may have contained errors. Wells Fargo also admitted it had made mistakes in thousands of foreclosure cases and promised to fix them but did not stop its foreclosures. All three lenders have said they're fixing the problems.
One of the biggest sticking points in settlement talks has been the amount of penalties the mortgage lenders would pay for their role in improper foreclosures. Federal and state officials have sought a figure greater than $20 billion while banks have pushed for about $5 billion.
A "monetary relief fund" was agreed upon in principle by May. But the formula for how much states and federal agencies would get became contentious.
Some states, upset with the slow movement on the settlement, have already taken action on their own.
New York's attorney general, Eric Schneiderman, was removed from an executive committee of 14 state officials in August after refusing to agree to an across-the-board immunity clause for banks.
Attorneys general in Arizona and Nevada, two of the states hardest hit by defaulted mortgages, have filed lawsuits against Bank of America, the country's largest bank, saying the lender misled and deceived homeowners who have tried to modify mortgages.
Associated Press writer Michael J. Crumb in Des Moines, Iowa; and AP real estate writers Derek Kravitz in Washington, D.C., and Alex Veiga in Los Angeles, contributed to this report.
WASHINGTON – The Energy Department on Friday approved four more solar energy loan guarantees worth nearly $5 billion, hours before a controversial loan program was set to expire.
Meanwhile, the Justice Department moved to take away control of a failed solar panel maker from its management and transfer it to a court-appointed trustee.
Energy Secretary Steven Chu said the department completed deals on four projects, including two that were sold late this week by Arizona-based First Solar Inc., a major solar manufacturer that had been seeking three federal loan guarantees for projects in California. The sales were announced Friday along with the loan guarantees.
The loans were approved under the same program that paid for a $528 million loan to Solyndra LLC, a now-bankrupt solar panel maker that has become a symbol for critics of the Obama administration's green energy program.
Two other solar loan guarantees worth about $1.1 billion were announced earlier this week, as the Obama administration pushed forward with the loan program despite pleas from GOP critics to halt it to avoid another Solyndra-like debacle.
Even as the loan program continued, the Justice Department took steps Friday to take away control of Solyndra from its management and transfer it to a court-appointed trustee.
In a filing with the U.S. Bankruptcy Court in Delaware, the Justice Department said it was seeking the appointment of a trustee because top Solyndra executives refused to answer questions about its finances and operations. Solyndra CEO Brian Harrison and financial chief W.G. Stover refused to testify before Congress last week, citing their Fifth Amendment protections against self-incrimination.
The Justice Department did not allege any wrongdoing but said "the inability or refusal of the corporate officers to answer material questions . establishes cause for the appointment of a trustee."
Solyndra, which filed for Chapter 11 bankruptcy protection in early September, faces a criminal investigation by the FBI, as well as scrutiny from congressional investigators and inspectors general at two federal agencies, Energy and Treasury.
Experts said management often remains in control of a company during Chapter 11 reorganization, but in some cases a court orders the appointment of a trustee to take control. If the Justice Department motion is granted by the bankruptcy court, the trustee could make decisions about the company's operations, including whether to liquidate the firm, a Justice Department spokeswoman said.
Chu said the solar projects, which could cost taxpayers as much as $6 billion, should help the U.S. as it competes with China and other countries to develop renewable energy.
"To win the clean energy race we must invest in projects like this that fund jobs and increase the generation of clean, renewable power in the U.S.," Chu said in a statement. "Deployment of utility-scale solar power will help bring down the cost of solar and strengthen our position as a global clean energy leader."
The deals announced Friday include a $1.5 billion loan guarantee to Florida-based NextEra Energy and other investors that bought a planned 550-megawatt solar farm on federal land in Southern California from First Solar, as well as $646 million to Illinois-based Exelon Corp. for a 230-megawatt solar plant near Los Angeles. Next Era Energy Resources and GE Energy Financial Services bought the Desert Sunlight project from First Solar, while Exelon bought the Antelope Valley project. First Solar will continue to build and operate both projects.
A third project, worth $1.2 billion, will help San Jose-based SunPower Corp. build a 250-megawatt solar plant in California, while $1.4 billion will go San Francisco-based Prologis Inc. to support installation of about 750 solar rooftop panels in 28 states.
The loan program expires on Friday.
Rep. Cliff Stearns, R-Fla., chairman of a House energy subcommittee that is investigating Solyndra, called the rush to approve loans unseemly.
"In a last-minute mad dash to beat the stimulus deadline, DOE rushed out an unprecedented tidal wave of taxpayer dollars — and the question still remains, `Where are the jobs?' `' Stearns said Friday. "American taxpayers are already on the hook for half a billion dollars for the sins of Solyndra. What surprises does DOE have in store from (Friday's) rush job?"
DOE loan program: http://www.lgprogram.energy.gov/
Follow Matthew Daly's energy coverage at http://twitter.com/MatthewDalyWDC
(Reuters) – A U.S. federal judge dismissed part of a case brought by European bond investors accusing Citigroup Inc (C.N) and its directors of misrepresenting or failing to disclose Citi's exposure to toxic mortgage assets and its own solvency.
The plaintiffs, including Norges Bank and Swiss & Global Asset Management AG, cannot sue Citi under the United Kingdom's Misrepresentation Act or the UK common law of deceit, because they have not shown that their purchases relied on Citi statements, ruled Judge Sidney Stein of the U.S. District Court for the Southern District of New York.
Plantiffs' fraud suits also cannot move forward under New York's common law, judge Stein said, because they have not shown actual reliance for misrepresentations and omissions.
The judge, in the September 30 ruling, said plaintiffs' claims over certain investments, can proceed under the UK Financial Services and Markets Act and under the U.S. Securities Act of 1933.
(Reporting by Nick Zieminski; Editing by Gary Hill)