California spurns $15bn in mortgage aid

By Shahien Nasiripour in Washington

California, home to the largest US property market, spurned an offer of roughly $15bn in lower monthly mortgage payments and reduced loan balances for its residents in talks to settle allegations of mortgage-related misdeeds by leading US banks.

Bank of America had guaranteed California borrowers would receive $8bn in mortgage aid, while Wells Fargo and JPMorgan Chase committed at least $5bn to the state’s distressed homeowners, according to people familiar with the matter, who declined to give exact figures.

California would have received more than half of about $25bn of aid that would be available to borrowers in a nationwide deal under discussion to settle allegations that banks illegally seized homes using faulty documentation.

Deal terms, sent to state attorneys-general late last week after nearly a year of talks between the banks and various states and federal agencies, did not include guaranteed minimums for any other states, people familiar with the matter said. Various state officials said they were unaware of the California offer.

“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.

That California had secured guaranteed minimums, when other states have only received estimates on how much money their troubled borrowers would receive, has the potential to further alienate other state officials, who have grumbled about a lack of specifics regarding settlement terms.

Kamala Harris, California attorney-general, left the national deal discussions in September, citing the terms then under discussion as “inadequate”. Her state’s participation is viewed by negotiators as being vital to a final accord, and Ms Harris has been pressured by the Obama administration to be part of a national deal.

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