MBS investors were not at the negotiating table for the multistate servicing settlement, yet they will feel the reverberations of the principal reductions and loan modifications the banks have promised state attorneys general and federal agencies. The $25 billion agreement reached last week among 49 states, the federal government and five major servicers – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial – allocates $10 billion toward principal reductions for underwater borrowers at risk of default. The banks will cough up another $7 billion for other forms of borrower...