California officials are refusing to sign a proposed settlement between U.S. states and the nation's biggest mortgage lenders over deceptive foreclosure practices, calling it "inadequate."
The objection raised by the nation's biggest state delivered a major setback to the deal, which promised to help roughly 1 million homeowners see the size of their mortgage reduced by an average of $20,000.
Five major banks _ Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial _have agreed to the settlement, which was sent around Monday for state officials to review.
California Attorney General Kamala D. Harris says the deal as written would limit her ability to bring civil charges against mortgage lenders that wrongfully foreclosed on homeowners. Harris, who is a Democrat, objected to an earlier version of the settlement in September.
"We've reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California," said Shum Preston, a spokesman for Harris.
Delaware officials have also said they won't sign on to the settlement.
A signed deal is not expected soon, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who has led the 50-state negotiations. He said late Monday that there are "terms we must still resolve."
The Obama administration has put pressure on states to accept deal, part of its latest push to help the depressed housing market.
Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high as $25 billion. About 750,000 Americans _ about half of the households who might be eligible for assistance under the deal _ could receive checks for about $1,800.
But the agreement could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans.
Nearly 8 million Americans have faced foreclosure since the housing bubble burst. In some cases, companies that process mortgages failed to verify the information on foreclosure documents. The worst practices, known collectively as "robo-signing," included employees signing documents they hadn't read or using fake signatures to sign off on foreclosures.
New York Attorney General Eric Schneiderman, who has opposed previous settlements, has not commented publicly on the latest deal. He was removed from the committee negotiating the settlement in August because of his tough stance.
On Tuesday, Schneiderman was asked by Obama administration to lead a new federal task force investigating the bubble of mortgage-backed securities that contributed to the 2008 financial crisis.
Schneiderman was also one of President Barack Obama's guests at Tuesday's State of the Union speech.