California pulls out of foreclosure talks

To refresh your memory, California had been a multi-state investigation into mortgage abuses around the country that was supposed to result in a settlement with the major lenders - and perhaps some relief for homeowners who got hit. But state Attorney General Kamala Harris called the proposed "inadequate for California homeowners." That could cause the entire deal to collapse. From the LAT:

Some state and federal officials had been seeking as much as $25 billion in penalties that would be used, in part, to write down loan balances for underwater borrowers. But it will be difficult to come close to that amount without the participation of California. California has more underwater borrowers than any other state and has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida. The move by Ms. Harris comes after eleven months of often frustrating negotiations between big banks such as Bank of America Corp. and J.P. Morgan Chase & Co.

Advocates for the homeowners were happy with the decision to drop out, figuring that the banks were getting off too easy. And they probably were (see post below). On the other hand, any real turnaround in the housing market will depend on a resolution of these cases, and today's move only puts that off. So it's really not the best news.