March 14, 2011 (Jeff Alan)

Virginia Attorney General Kenneth Cuccinelli, a Republican, said his state is among “at least a dozen” that don’t back the Obama administrations proposal to resolve a nationwide probe of foreclosure and mortgage-servicing practices. Declining to name the other states, other than his own, that oppose parts of the proposal, the Attorney General went on to say that there isn’t a consensus among all 50 state attorneys general about the terms of the settlement proposal.

“When some attorneys general found out what was being agreed to, they had a great degree of unease over it,” Cuccinelli said.

Cuccinelli added that a “major problem” with the government’s proposal is that Freddie Mac and Fannie Mae aren’t involved in the negotiations. He also said that terms in the settlement proposal would impose documentation requirements on banks that go beyond Virginia law.

Cuccinelli also said principal reductions “sounds like a welfare discussion, not a regulatory discussion. That’s not the appropriate role for attorneys general.”

Oklahoma Attorney General Scott Pruitt also opposes the proposal saying requiring loan principal reductions would force mortgage servicers to violate their contractual obligations to mortgage investors.

“I’m concerned that what started out as an effort to correct specific practices harmful to consumers has morphed into an attempt to fundamentally restructure the mortgage loan industry in the United States,” he said.

Pruitt agrees that there are practices by mortgage servicers that need to be fixed such as taking steps to foreclose on a home while talking to the borrower about a loan modification but that the current proposal goes too far.

Cuccinelli said some states could propose an alternative plan.

Tags: loan principal reductions, mortgage servicers, Virginia, Oklahoma, Obama proposal, foreclosure, mortgage loan industry