Attorney General George C. Jepsen is walking a fine line between celebrating his role in negotiating a $25 billion national settlement with mortgage servicers and tamping down expectations about what the deal means for struggling homeowners.
“I just think it’s important not to oversell it or undersell it,” Jepsen said Tuesday after a legislative appearance. “It’s big deal. This will save thousand of families their homes in Connecticut, if it’s implemented correctly. And that’s huge.”
In a hearing before the legislature’s Banks Committee, Jepsen urged legislators to use $27 million in settlement funds that will go directly to state government over the next three years ago to oversee the settlement and provide other aid.
Jepsen said many underwater mortgage holders are in denial, refusing to respond to invitations by mortgage servicers to come to work-out sessions. Some appeals have had a response rate of 2 percent.
“People are shell-shocked,” Jepsen said. “They are so humbled by the process. They don’t want to engage.”
Jepsen was one of the small number of state attorneys general on stage in Washington two weeks ago with U.S. Attorney General Eric Holder when the deal was proclaimed as the largest joint federal-state financial settlement in history.
It stemmed from an investigation that began in October 2010, prompted by disclosures of mortgage services using “robo-signed” affidavits in foreclosure proceededings.
Investigators found that the banks had not reviewed the validity or accuracy of the filings.
A month after the investigation began, Jepsen was elected attorney general, succeeding Richard Blumenthal, a 20-year incumbent.
Jepsen deliberately kept a lower profile in his first year, eschewing the regular press conferences Blumenthal held on a wide range of issues. According to a variety of polls, they helped establish Blumenthal as the state’s best-known and most popular Democrat.
But the mortgage deal represented a coming out of sorts for Jepsen, a former state Senate majority leader and Democratic state chairman who was boxed out of higher office until Sen. Chris Dodd retired and Blumenthal ran for his seat.
“I think this is the most significant thing I’ve been personally involved with. NU-NSTAR is ramping up to be the next big thing,” Jepsen said, referring to the merger of Northeast Utilities and NSTAR. “But this is the biggest.”
Jepsen succeeded in urging utility regulators, who initially concluded they had no role in reviewing the merger, to reconsider. They are now holding hearings and are expected to impose conditions on the merger to protect Connecticut ratepayers.
Jepsen is only the state’s third full-time attorney general, following Joseph I. Lieberman and Blumenthal, both of whom are now U.S. senators.
On Tuesday, Jepsen doffed his suit coat and settled into a leather chair before the Banks Committee. He was accompanied by Matthew Budzik and Joseph Chambers, two assistant attorneys general who worked with Jepsen during the negotiations. He introduced both to the committee.
Democrats and Republicans on the panel heaped praise on Jepsen, even as they bemoaned the limits of the settlement with Bank of America, Citibank, JPMorgan Chase, GMAC and Wells Fargo.
Jepsen estimated that $120 million is available for principal reduction and other forms of direct consumer relief in Connecticut, which could help thousands of residents trying to keep their homes.
The settlement also will allow homeowners who are current, but underwater, to refinance loans to take advantage of low interest rates, saving state residents about $36 million in interest costs.
And about 7,500 residents who lost their homes to foreclosure are eligible for cash payments of about $1,500 as compensation for unfair treatment. To collect the payments, they need not waive any legal claims against the banks.
But Jepsen was quick to emphasize the limits of the settlement: it covered only customers of the nation’s five largest mortgage servicers, who handle about 65 percent of all mortgages.
“I am acutely aware that this settlement will not fix the entire housing market by itself, nor turn around the larger economy all by itself,” Jepsen said. “I and my negotiating partners have been careful to not to oversell the scope and impact of the deal.”
Jepsen told the committee that the same group of attorneys general now are pursuing a settlement with the next nine largest mortgage servicers, who handle about 20 percent of the market.
Aside from the relief to consumers, the settlement established new standards for mortgage servicing. Jepsen said the standards are reform that consumer advocates were unable to get through Congress.
When asked why California and New York pursued their own settlement, Jepsen smiled and suggested that no one on the committee would be surprised that politics played a role in a sweeping undertaking involving so many elected officials.
Rep. William Tong, D-Stamford, the co-chairman of the committee, is a candidate for U.S. Senate. Tong refrained from being overtly political during the hearing, but his Senate campaign issued a press release about Jepsen’s presentation.
“This is a good start, but more needs to be done,” Tong said. “I urge state and federal authorities as well as consumers, pension funds and others to keep investigating. Additional investigation, leading to possible litigation and criminal charges, can secure more money and better loan terms for homeowners hurt by financial industry abuses.”