In the last week all the news coming out of mortgage negotiations between banks and states has said the same thing — it’s coming.
Now, increasingly, it looks like its not. We saw one sign on after the President’s State of the Union address, when the President announced that he would be creating a special task force to investigate the causes of the mortgage crises. The reaction from bank leaders (Jamie Dimon for one) was negative.
And now, according to the FT, we have another big one. California, one of the states most seriously impacted by the housing market collapse, has rejected a $15 billion settlement with banks. Bank of America would’ve given $8 billion, and Wells Fargo and JP Morgan chase would have each at least $5 billion to California homeowners in trouble.
Here’s why the state rejected the proposal. From the FT:
“The proposals offered were inadequate for California because they did not contain the aspects vital for our state: transparency, real relief for distressed homeowners and strong enforcement mechanisms to guarantee accountability,” said Shum Preston, a spokesman for the state attorney-general.
This whole situation effects other states too, because now that the terms of the California deal are out, other states want the same deal — and by same, they mean they want guaranteed minimums. Other states weren’t getting them before, and now that they know the banks were willing to give them to California, they want them.
California’s AG, Kamala Harris, already dropped out of national negotiations with banks because she felt the terms were “inadequate.” This rejection only complicates negotiations around the entire country further.