Opposition to the proposed servicer settlement developed a stronger stance this week as four attorneys general released a letter to Iowa Attorney General Tom Miller, who is leading the states’ investigation.

Attorneys general Kenneth Cuccinelli of Virginia, Greg Abbott of Texas, Pam Bondi of Florida, and Alan Wilson of South Carolina sent a letter to Miller because they wanted to “raise concerns about certain provisions of the draft term sheet submitted to mortgage servicers this month.”

The AGs are not the only ones with concerns about the 27-page proposal. Several of the servicers have spoken out against some of the terms within the settlement, particularly ones regarding mandatory principal write-downs for underwater borrowers.

And the Securities Industry and Financial Markets Association (SIFMA) released a statement warning legislators and policy makers to beware of unintended consequences from the settlement.

“Any reform of mortgage servicing standards must be considered through the interest of the consumer and what would have the best outcome for the housing market and broader U.S. economy as we continue to address foreclosure issues,” they said.

Last week Cuccinelli said he felt a “degree of unease” about some of the terms of the settlement. This week the causes for his unease were explained in detail.

The letter says that as the chief legal counsels of their respective states, attorney generals are within their rights to attempt to correct the injustices and abuses that occurred in the servicing industry.

“These practices include, among others, robo-signing and abuse of the legal process, lack of proper documentation to establish the right to foreclose, inaccurate and/or unfair

handling of borrowers’ account information, poor response to distressed homeowners, the lack of transparency in loss mitigation programs, initiating foreclosure proceedings against homeowners pursuing loan modifications in good faith, unreasonable delays in loss mitigation review, forced placed insurance, and charging duplicative and excessive and other discretionary fees,” the letter said.

But, it continued, while the four AGs support actions to correct the problems, the term sheet has mandates and suggestions that are out of the scope of the enforcement role of an attorney general.

The letter asserts that some of the proposal’s terms “could have the unintended effect of unnecessarily prolonging the foreclosure process and therefore delaying the recovery of the housing market.”

Not only that, the AGs assert that the proposal’s suggestion of principal write-downs for underwater borrowers “do a disservice to homeowners who, despite an economic downturn, have worked hard to maintain their mortgages.”

The AGs believe some homeowners will “simply default on their loan and use the States’ agreement to obtain a principal reduction,” which would result in an “unintended moral hazard” that results from taking advantage of the servicers’ obligations to the settlement.

The letter also says in terms of some of the provisions in the settlement, the punishment does not fit the crime.

“The term sheet’s principal reduction and loan modification proposals do not actually remedy the types of violations our investigation was intended to address,” the letter reads.

Despite the concerns raised in the letter, the AGs made it a point to mention their gratitude for the time and effort Attorney General Miller and his staff dedicated to developing the settlement, and acknowledge that the settlement is only supposed to be a first draft and a way to spur negotiations with the settlers.

With so much dissent, the two months following the settlement’s release that were initially slated for negotiations to hammer out final terms looks like they will pass without much progress.

According to the New York Times, Attorney General Tom Miller said that time line now feels like it “may be ambitious,” since “there haven’t been any formal negotiations at this point.”