By Alejandro Lazo, Los Angeles Times
October 21, 2011, 9:24 p.m.

California is reemerging as a central focus for state attorneys general hoping to reach a nationwide wrongful-foreclosure settlement with major banks, even though the Golden State walked away from talks three weeks ago.

Iowa Atty. Gen. Tom Miller, who is leading the negotiations on behalf of the states and federal agencies, met with representatives of the nation’s five largest mortgage servicers in Washington on Friday to discuss details of a new plan aimed at enticing California back into the fold.

Under the proposal, Miller and the other attorneys general want the banks to devote $5 billion to refinance the mortgages of as many as 300,000 “underwater” U.S. homeowners, those who owe more than their houses are worth, according to a person familiar with the plan who requested anonymity because he was not authorized to speak on the matter.

The homeowners would have to be up to date on their payments and would get new mortgages with lower interest rates, a move intended to ease those homeowners’ finances. The banks have countered with a $2-billion deal aimed at reaching up to 150,000 homeowners.

The refinancing plan would be added to the already $20-billion proposal the states have negotiated, which includes principal reduction for certain homeowners and mortgage servicing and foreclosure reforms.

The refinancing plan would cover homeowners whose loans are owned by banks joining in the talks: Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.

The Obama administration also is pushing a refinancing plan for underwater loans owned by the large mortgage investors Fannie Mae and Freddie Mac. Obama officials said details of that plan are expected to be unveiled in coming weeks.

In exchange for the refinancing component, state attorneys general would release the banks from mortgage origination allegations — that is, allegations of fraud and abuse in the creation of home loans.

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