Kamala Harris pressured to reject bank foreclosure settlement

California Atty. Gen. Kamala Harris is attracting increasing pressure from powerful Golden State players to reject a major settlement with U.S. banks accused of wrongful foreclosures.

Lt. Gov. Gavin Newsom has joined a group of California union leaders, activists and politicians in calling the direction of negotiations “a deeply flawed settlement proposal with the banks at the heart of the nation’s mortgage crisis.”

Harris has emerged as a key player in pursuing the nationwide settlement with major U.S. banks accused of wrongfully foreclosing on homeowners. She has been urged to take a hard line by consumer groups seeking help for homeowners devastated by the mortgage crisis.

A spokesman for Harris, Shum Preston, declined to comment Thursday on a letter by the newly formed group Californians for a Fair Settlement. But last week he said the attorney general is “listening keenly to what the California public has to say on this issue and rigorously evaluating any settlement proposals.”

Harris has been negotiating with the five largest mortgage servicers for months as part of a coalition of attorneys general and federal agencies seeking to hammer out a deal surrounding allegations that banks committed widespread foreclosure errors. Those involved in the talks see Harris’ participation in any settlement as crucial because of California’s size and because so many home repossessions are concentrated in the state.

The letter by Californians for a Fair Settlement, which The Times obtained Thursday, calls on Harris to reject a settlement that lacks significant principal reduction for troubled California homeowners, has overly broad liability release language that would hamper future investigations into bank practices and would require banks to pay about $20 billion.

The group, in its letter, called that amount “outrageous” and “a figure which might not even be enough to cover damages for the state of California, let alone the entire country.”

Other signatures included those of Rep. Maxine Waters (D-Los Angeles); Joshua Pechthalt, president of the California Federation of Teachers; Zenei Cortez, president of the California Nurses Assn.; Richard Hopson, chairman of the Alliance of Californians for Community Empowerment; and Steve Matthews, executive director of Service Employees International Union Local 721.

The pressure comes as foreclosures in California and other parts of the West have begun to surge anew. Significantly more properties entered the foreclosure process during August in the nation’s hardest-hit markets, including battered parts of inland California and other areas in the West, as Bank of America Corp. stepped up its activity in states where a court order is not needed to take back a home.

alejandro.lazo@latimes.com