ALBANY, N.Y. (AP) — Many more bank settlements over mishandling of mortgage-backed securities will follow JPMorgan's record $13 billion agreement signed this week, New York Attorney General Eric Schneiderman said Wednesday.
Schneiderman co-chairs a group pursuing federal and state civil claims over sales of the securities that collapsed as the U.S. housing bubble burst in 2007. He declined to say which institutions will settle or when.
Schneiderman's office has pending lawsuits against several major banks. It sued JPMorgan a year ago and will shortly receive $613 million in cash, with the settlement also requiring another $400 million in help for struggling New York homeowners through reductions in mortgage principal and fees.
"Other banks will follow," Schneiderman said. This first settlement provides relief to people with troubled mortgages, provides accountability for bank misconduct, and enables the bank to put the civil liability issue behind it, he said.
"My colleagues in the working group and I will continue our investigations," Schneiderman told reporters, adding that staff on the JPMorgan case will be redirected to accelerate those probes. "I think the process of negotiating with some banks will start very quickly."
While 15 percent of the settlement cash goes to the state's general fund, he said the balance will pay for legal services and counseling for homeowners facing foreclosure.
The Empire Justice Center does some of that legal work under a previous settlement with five banks over foreclosure abuses. Kirsten Keefe, senior attorney at the nonprofit, said foreclosure filings in New York are expected to return to about 44,000 next year following a two-year drop to half that due to new court requirements for more accurate documents.
"It caused people to think the foreclosure crisis was getting better in New York because there was a fictitiously low filing rate," Keefe said.
Americans lost about $7.4 trillion of home equity in the housing market collapse, Schneiderman said. The mortgage-backed securities lacked the needed scrutiny by the banks that packaged and sold them but represented they had done the due diligence, he said.
The federal criminal investigation into individuals at JPMorgan is ongoing, he said, declining to say whether he thinks prosecutions are likely. He said the threshold for showing criminal wrongdoing is higher and requires also proving knowledge and intent.
JPMorgan Chief Executive Jamie Dimon said Tuesday the settlement terminates all pending civil enforcement by the U.S. Justice Department and attorneys general from California, Delaware, Illinois, Massachusetts and New York relating to "a very significant portion of legacy mortgage-backed securities-related issues" by the bank as well as Bear Stearns and Washington Mutual, which it acquired in 2008.