Attorney General Kamala Harris says the state will not accept terms that would grant immunity to the lenders. Rich Pedroncelli / AP

Carolyn Said, Chronicle Staff Writer
Saturday, October 1, 2011

California Attorney General Kamala Harris is withdrawing from multistate negotiations with big banks over their handling of foreclosures and instead will continue her own probe in an attempt to reform bank practices and prevent foreclosures, she said Thursday.

“California has taken a big hit” in the foreclosure crisis, she said in an interview. “A lot of families are suffering. They deserve to have a voice, they deserve to be heard, they deserve to receive just compensation for the harm that’s been done.”

All 50 attorneys general, along with federal authorities, began investigating banks after an outcry last year over lenders’ sloppy handling of foreclosures, nicknamed robo-signing because bank employees signed sworn documents without reading them. But a proposed settlement was criticized as inadequate and other attorneys general had begun to back away from the table.
‘Enormous news’

Consumer advocates, who had urged Harris to withdraw, hailed her announcement.

“This is enormous news, bigger than just California news,” said Rick Jacobs, chairman of the Courage Campaign, a progressive advocacy coalition. “California is ground zero in so many ways for the mortgage debacle. She is saying, ‘We’re going to find out what happened, and do everything we can to make sure banks help restart the economy by keeping people in their homes.’ ”

Harris said that banks should reduce the principal owed by struggling homeowners, improve procedures for modifying loans and be held accountable for their role in precipitating the crisis.

“The relief contemplated would allow too few California homeowners to stay in their homes,” she wrote in a letter to the heads of a 50-state committee of attorneys general. She also objected to the idea of relinquishing future legal claims against the banks in exchange for a settlement.

John Eller, director of the San Francisco office of the Alliance of Californians for Community Empowerment, was among those who supported the decision. “Our main focus is to achieve principal reduction, so as many homeowners as possible can stay in their homes and help reinvest in the economy,” he said. “This is the right direction for California” to accomplish that.

“Not a single banker has gone to jail for wrecking the American economy,” CREDO Action, the activist arm of what was formerly called Working Assets Wireless, wrote in a statement. “Harris has taken an important first step in saying we need to investigate unscrupulous banks before we trade broad immunity from prosecution for a mere slap on the wrist.”

Fraud task force

To read entire story, click here.