Schneiderman’s Last-Minute Cancellation Spells Trouble for Foreclosure Fraud Settlement

As I mentioned in last night’s roundup, New York Attorney General Eric Schneiderman abruptly cancelled a conference call yesterday 10 minutes before it was to begin. The subject was supposed to be the foreclosure fraud settlement, and there was idle speculation that Schneiderman would announce that he would join the settlement. This would spur other holdouts to join, presumably, and at the very least break the somewhat united front against the settlement. You’d probably be looking at a formal announcement within days. But instead, Schneiderman cancelled, postponing the call “indefinitely.”

It looks like the issue is the lawsuits against MERS and three banks that he filed on Friday. The banks want him to drop it.

One person familiar with the negotiations said several banks wanted Schneiderman to withdraw a suit he filed on Friday against prominent financial firms, saying they had acted deceptively by filing erroneous and fraudulent foreclosure documents through a popular electronic mortgage registry designed to allow firms to save time and money by bypassing local property recording requirements. The person spoke on the condition of anonymity because the talks were ongoing. It was unclear whether Schneiderman had intended on Tuesday to address the status of those lawsuits during the news conference.

Schneiderman is working with bank lawyers to find a way to join the settlement and continue the lawsuit, but the banks see this as Schneiderman having his cake and eating it too. They feel that the lawsuit against the banks’ use of MERS is in an area covered by the settlement.

Catch the rest here…