This is big. The New York Times editorial board is saying that New York Attorney General Eric Schneiderman shouldn’t go along with the Obama administration’s, and Iowa AG Tom Miller’s, efforts to have a broad settlement of their ongoing foreclosure fraud investigation. (John reported on the administration’s efforts to push prosecutors to settle, here.)

The Times ed board then rebuffs HUD Secretary Shaun Donovan, who has been pressuring Schneiderman to stop rocking the boat. The Times doesn’t get all their facts right – the settlement in discussion isn’t for a narrow immunization around robosigning. But what’s most impressive, beyond them calling out the Obama administration’s efforts to help Wall Street avoid investigation and accountability, is how the Times accurately calls the settlement inadequate and one of the weakest options out there for helping homeowners.

The administration also says that the proposed settlement would require the banks to write down the principal balance on underwater loans. According to news reports, the banks are likely to pay around $20 billion in the deal. With 14.6 million homeowners owing $753 billion more on their mortgages than their homes are worth, how far does the administration think $20 billion would go? The administration should pursue principal reductions for stressed borrowers, and it could do so immediately by calling on Fannie Mae and Freddie Mac to refinance the underwater loans of borrowers who are current in their payments. What it shouldn’t do is pretend that the proposed settlement is the only — or best — way to get quick relief to homeowners.

The numbers being tossed around with the foreclosure fraud settlement are tiny. Even at ten times what’s being talked about, the settlement figure, which would be spread across five major banks, would be inadequate. And the administration already has tools at its disposal to directly benefit underwater homeowners. They’re just refusing to use them.

Phillip Anderson of New York’s top political blog, The Albany Project, suggested that people call and thank Schneiderman for standing up for the rule of law and for homeowners. If you’re in NY, drop his office a line and tell him you stand with him: