Will Banks’ $25 Billion Foreclosure Settlement Bar Future Financial Fraud Charges?

There are two key states that still must sign on to the proposed $25 billion mortgage foreclosure settlement that may be announced as early as today by the federal government and state attorneys general across the country: California and New York. California is crucial because of the incredible number of families that have been foreclosed on over the past few years. New York is essential in large part because the state’s attorney general, Eric Schneiderman, has been named to co-chair the new Residential Mortgage-Backed Securities Working Group under President Obama’s Financial Fraud Enforcement Task Force – and because he has just brought a massive lawsuit against a number of major banks for “deceptive and fraudulent use” of MERS, which he cannot simply drop as a practical matter. 

Schneiderman recently spoke to Chris Hayes on MSNBC and said that New York “absolutely” will not join the settlement if the banks are given “a release from other conduct that hasn’t even been investigated yet.” In particular, he said, the Mortgage-Backed Securities Working Group will continue to investigate “the possibilities of tax fraud, insurance fraud, securities fraud. We’re going to look at this stuff very carefully.”

We have a relatively high degree of certainty, therefore, that any settlement will carve out potential civil and criminal charges potentially associated with those claims.
 
Stay tuned.