Ever since last year's robo-signing and foreclosure scandal broke, the attorneys general of Florida and all 49 other states have been investigating the foreclosure practices of the major mortgage banks. The attorneys general and some federal agencies have decided to negotiate a settlement with the mortgage banks to avoid years of litigation in state and federal courts over fraudulent foreclosure paperwork.

Not surprisingly, the banks are trying to negotiate a settlement that gives them as little pain as possible. However, some of the attorneys general are saying that they will not sign on to an agreement with the banks that lets them off the hook too easily.

Fort Lauderdale "stop foreclosure" attorneys have noted that so far it is Massachusetts, New York and Delaware attorney generals that have said publicly that they will not agree to a settlement that is too lenient on the banks. They say that there are other states in agreement with them, but have declined to say whether Florida is one of them.

What the doubters are concerned about is any agreement that says the banks will not be held responsible for the securitization of mortgages, where they sold off the risk of mortgages that they knew were bad, or the running of a database of mortgages called MERS.

The concern with MERS is that it was used by the banks to track mortgage servicing and ownership interests in mortgage loans. The database may not have complied with state law in many states, and the attorneys general are reluctant to make an agreement limiting liability for breaking state law before they can investigate what actually took place.

Source: Bloomberg "Massachusetts to Spurn Any Foreclosure Deal With Some Liability Releases" 7/25/2011