By filing this lawsuit, Schneiderman has made it pretty clear where he stands on the deal that the Obama administration has proposed for the banks in their role in the foreclosure crisis. The deal is seen by some as being excessively soft towards the banks.

Schneiderman even went on record to pretty much call the proposed settlement the equivalent of giving a blanket plea deal to a criminal. States have till February 6 to decide if they want to join the settlement.

The fact that Schneiderman has filed this lawsuit is made even more interesting by the fact that he is one of the five co-chairs of a task force that President Obama announced to investigate fraud related to bonds backed by mortgage loans.

At the heart of the suit is the fact that these three banks used MERS – Mortgage Electronic Registration Systems. This system is used to register ownership of mortgage loans. Before the system was put in place, that work was done at the local courthouses, which many felt slowed down the entire mortgage process. But after its introduction in 1995, over 70 million mortgages have been handled by it.

But the system has problems. Schneiderman’s suit says its use resulted in many fraudulent foreclosures and also undermined New York’s process of reviewing each and every foreclosure case. Homeowners also faced difficulties in accessing mortgage-related documents while they were facing foreclosure.

Schneiderman believes that the banks used the system to give out mortgages more quickly and then when they began foreclosure proceedings, abused it to throw out homeowners from their properties without following proper procedures.

The New York Attorney General’s office issued a statement where it explained the charges against the banks. The major charges against the banks and MERS are:

• MERS has filed over 13,000 foreclosure actions against New York homeowners listing itself as the plaintiff, but in many instances, MERS lacked the legal authority to foreclose and did not own or hold the promissory note, despite saying otherwise in court submissions.

• MERS certifying officers, including employees and agents of JPMorgan Chase, Bank of America, and Wells Fargo, have repeatedly executed and submitted in court legal documents purporting to assign the mortgage and/or note to the foreclosing party. These documents contain numerous defects, including affirmative misrepresentations of fact, which render them false, deceptive, and/or invalid. These assignments were often automatically generated and “robosigned” by individuals who did not review the underlying property ownership records, confirm the documents’ accuracy, or even read the documents. These false and defective assignments often masked gaps in the chain of title and the foreclosing party’s inability to establish its authority to foreclose, and as a result have misled homeowners and the courts.

• MERS’ indiscriminate use of non-employee “certifying officers” to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose. MERS certifying officers have regularly executed and submitted in court mortgage assignments and other legal documents on behalf of MERS without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel. The signature line just indicates that the individual is an “Assistant Secretary,” “Vice President,” or other officer of MERS. Indeed, these documents often purport to assign the mortgage to the certifying officer’s own employer. Moreover, as a result of the defendants’ failure to track the designation of certifying officers and the scope of their authority to act, individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan.

• MERS and its members have deceived and misled borrowers about the importance and ramifications of MERS’ role with respect to their loan by providing inadequate disclosures.

• The MERS System is riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information. In addition, as a result of these inaccuracies, MERS has filed mortgage satisfactions against the wrong property.

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Pennsylvania firms have net income or overall profits up about 3% compared to between 12 and 15% increase in other markets. Jeffrey Grossman, the legal specialty group’s managing director, said that the reason other firms are doing better is because they’ve had more expense cuts. “Again, they didn’t have as much of a downturn and didn’t have to cut headcount as much resulting in a net increase. And the bulk of those cuts in other markets were on the headcount side,” he added.

A law firm analyst speculated that if the trend would not change, job cuts may still be on the horizon for the law firms in the region. Grossman backed up this prediction as to Pennsylvania’s performance. “Even though they’ve made headcount reductions, it’s not enough. So, I suspect next year to sustain profitability, there will have to be more headcount reductions taken.”

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Former Supreme Court Justice John Paul Stevens gave an interview to 60 Minutes…

New York and Southern California law firms registered a slight increase in terms of revenue growth…

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Jeffrey Grossman, national managing director of Wells Fargo’s legal specialty group, said that law firms nationwide have gone through various economic challenges in the past months. “The markets that experienced significant downturns, New York and Southern California, are generally the markets that have had more of an economic recovery,” Grossman explained.

Grossman noted that law firms will seriously boost their profits in 2011. However, without substantial increases in revenue and productivity, law firms will need to make further cuts. He predicted that reduction of law firm staff is possible to happen if not likely. “You’re going to see more cuts in terms of staff,” Grossman ended.

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Howard Kennedy: 40 lawyers and staff

Kirkland & Ellis: undisclosed staff

LG: 15 lawyers and 18 staff

Troutman Sanders: 28 lawyers (unconfirmed)

Eversheds: 10 lawyers

Trowers & Hamlins: 17 lawyers and staff

Shearman & Sterling: undisclosed lawyers

Wells Fargo & Co: undisclosed lawyers

Womble Carlyle: over 20 lawyers and staff

Perkins Coie: 12 lawyers and 26 staff

Maclay, Murray & Spens: 38 lawyers and staff

Harney Westwood & Riegels: 2 lawyers and 6 staff

Total: 67 lawyers, 50 staff, 115 unidentified

Week of April 5th: 144 lawyers, 310 staff

Week of March 29th: 199 lawyers, 474 staff

Week of March 22nd: 455 lawyers, 219 staff

Week of March 15th: 91 lawyers, 177 staff

Week of March 8th: 574 lawyers, 812 staff

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Online rumors say that the bank, which recently merged with Wachovia, is cutting up to 20% of its legal department. The bank would not confirm the numbers, but characterized the percentage affected as “small.”

Founded in New York in 1852, San Francisco, California-based Wells Fargo & Co. is the 4th largest bank in the US by assets, and the second largest bank by market cap.

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Bank of America, JP Morgan Chase, and other big banks have bought bank-owned life insurance policies, according to a statement from the Clearman Law Firm. Wells Fargo, Citi Group and Wachovia were also mentioned. With bank-owned life insurance, a bank names itself as the beneficiary of life insurance policies covering its employees, said the firm.

Typically, a bank will buy a policy on a smaller group of officers and directors, using the cash value and proceeds to recoup benefit expenses.

Almost half of all banks in the US own bank-owned life insurance policies, which amounts to around $120 billion in value. Many bank employees “have been laid off, and yet the bank still stand to benefit financially when those employees die,” said attorney Scott Clearman.

Wal-Mart got in trouble for this a few years ago. In fact, it’s a common corporate practice. While it seems distasteful, the truth is it’s just a form of investment. The employee on whom the policy is taken out is not exploited or endangered.

It would still be nice if employees could opt out, however.

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