Delaware AG Biden: Mortgage deal not enough

Jeremy Hobson Feb 7, 2012

Jeremy Hobson: So far 40 states have signed on to a national settlement with the nation’s big banks. It would force the banks to pay people who lost their homes to foreclosure, and reduce costs for homeowners who are underwater. That’s in exchange for dropping civil lawsuits against banks accused of engaging in abusive foreclosure practices.

But several states are still holding out for a better deal. One of those is Delaware, and that state’s attorney general, Beau Biden, joins us now.

Good morning.

Beau Biden: Good morning.

Hobson: So you haven’t signed on to this settlement with the banks yet. Why not?

Biden: Well, we have questions still, specifically as it relates to MERS (Mortgage Electronic Registration System), which our state sued in October of last year. And we want to make sure that we can serve our complaint and our lawsuit against them.

We have some other questions and we’re working our way through those. These are not dissimilar to the question that the New York attorney general has as it relates to MERS and the lawsuit he filed agains MERS and the banks on Friday.

So we’re working through questions that maintain our ability to pursue MERS and potentially sign on. But we have to make sure that we can perserve that right.

Hobson: And just to clarify, MERS, which we’ve talked about on this program, is this system that allowed banks to transfer the ownership of mortgages without going through county recorders offices and local government offices. It made it a lot quicker.

Are the other states going to go ahead without you with this settlement? Is it your sense that they’re close to a deal?

Biden: I don’t know. I read the same reports you’re reading this morning. Sounds like Attorney General [Tom] Miller saying that 40 or so states have signed on. But it looks that 10 at least have not. So there’s still questions that attorneys general are asking to make sure that they can perserve their investigations that many of us have, before we sign on to this settlement.

Hobson: But if you hold out and the other states go ahead, of course homeowners in Delaware who were foreclosed on or underwater will get absolutely nothing. Isn’t that a big risk?

Biden: Well, it is a risk. But look, my job is to pursue the case I have against MERS. I think going after MERS is one of the central elements of making sure we don’t end up here again five, 10, 15 years from now.

So that’s why I filed a major lawsuit against MERS, which is kind of tough to explain, but there’s a big complaint on our website if anybody wants to see what that’s all about.

But the other piece is that the reality is the servicing standards are going to change no matter what. The banks who “robosigned” are going to change based on the public pressure being brought to bare; the OCC (Office of the Comptroller of the Currency) rules that are going to require them to change. And so there will be relief for all citizens and borrowers to some extent, at some level.

Hobson: Sounds like you think you’re better off keeping the option available to sue than to go along with this settlement?

Biden: An attorneys general should never give up their ability to do their job, and that’s what I need to do. And I can’t have anything limit my ability to do my job.

Hobson: Beau Biden is the attorney general of the State of Delaware. Beau Biden, thanks a lot.

Biden: Thank you very much.

Hobson: Now let’s get reaction from our regular Tuesday analyst, Juli Niemann of Smith Moore and Company. She’s with us live from St. Louis.

Good morning.

Juli Niemann: Good morning.

Hobson: So could a settlement like the one that Beau Biden was just talking about being skeptical of help the housing market.

Niemann: It will but there’s still hammering to go here. Because Nevada’s AG has the same concerns. They don’t want to see a federal government global settlement because you trade real damages in exchange for a wish to bring it to an end; call it bygones.

And Missouri’s attorney general is taking an entirely different tactic. He’s filing a forgery fraud suit against the banks for robosigning. So there’s a lot to be hammered out but everybody wants to get this pressing on. And the government HARP (Housing Assistance Refinance Program), which is that renegotiation of interest rates and purchases, really is starting to work. The banks have to really get behind it and reduce interest rates. This will clear the decks.

Hobson: All right, well these are a lot of things that are going on right now to try to help the housing market. Let’s zoom out for a second and just let me ask you: where are we with that? When are we going to reach a bottom in terms of prices?

Niemann: Well how do you bottom out? Two things, first of all, new housing construction. And we have turned the corner. Last week’s data and some related positive news in job supports in the private sector is very encouraging here. So it looks like new housing construction has bottomed out.

Pricing. Well there’s a big lag with the Case-Schiller Index, that’s November, Corelogic, is December, but the good news right there is sales rates for all homes – new and used – have flatlined for almost a month now. So less inventory on the market is going to release pricing pressure downward. But that won’t happen unless the banks are a pal and go along.

Hobson: Juli Niemann, analyst with Smith Moore and company,
thanks as always.

Niemann: You bet.

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