Is the most infamous home mortgage story of late 2010—the “robo-signing” of foreclosure documents—finally coming to closure in early 2012?

For those of us who keep an eye on this stuff, we’ve wondered throughout all of 2011 whether the states’ attorneys general could do what the federal banking and housing regulators seemed unable to do: hold the mortgage lenders responsible for their glaring problems in loan servicing and foreclosure processing.  “Robo-signing” itself involved loan servicing company employees signing countless foreclosure documents in which they asserted personal knowledge about essential facts, when in fact those employees had no knowledge whatsoever of those facts. This then led to the uncovering of one major set of irregularities after another, including the giant MERS fiasco involving serious challenges to the legal authority of mortgage lenders and servicers to foreclose under any circumstances.

When all 50 of the states’ attorneys general got together in late fall of 2010 to address this set of problems, there was hope that they would be able to accomplish what the national regulators could or would not. They were seen as being closer to Main Street than Wall Street, and experienced with dealing pragmatically with both consumer abuses and business concerns. Indeed within a few months detailed draft settlement terms were drafted and being circulated. But then major rifts quickly arose. Last spring, eight Republican attorneys general—from Virginia, Texas, Florida, Oklahoma, South Carolina, Alabama, Georgia and Nebraska—announced that they did not support the draft settlement as being too tough on the banks and unfair to people who were paying their mortgages. Around the same time, the watchdog National Institute on Money in State Politics issued a report stating that the “campaign war chest” of the Democratic attorney general Tom Miller of Iowa

“got a dramatic boost after he announced his leadership of the 50-state attorneys general investigation into foreclosure irregularities. Out-of-state law firms and donors from the finance, insurance, and real estate sector gave $261,445-which is 88 times more than they had given him over the previous decade.”

And now more recently, as the settlement again seems to be finally reaching a close, some of the more liberal attorneys general, from among the most populous and influential states, such as New York and California, as well as perhaps Massachusetts, Nevada, and Delaware, seem to be backing out of the deal because they say that their homeowners would simply not be getting adequately compensated by the banks.

So is there going to be a deal or not, whether it covers all 50 states or not? It certainly now looks highly unlikely that a universal 50-state agreement will happen. And if some of the largest states—such as California and New York—and some with the worst foreclosure problems—such as Nevada and Florida—are not participating, then the banks lose a great deal of incentive to stay in the deal either. There continues to be some indication that a settlement will come together—here’s a very recent Time magazine blogger’s summary of its anticipated terms, which he figures will be “finally unveiled” as early as January. You can read about them there it you want—I won’t be telling you more about any deal terms here until I think there’s a better chance that it will ever come to pass and have any practical impact on my clients.