New York Attorney General Eric Schneiderman To Sue Wells Fargo & Bank Of America For Violating National Mortgage Settlement
Attorney General Has Documented Hundreds Of Cases Of Homeowners Put At Risk By Banks’ Violations Of Settlement Terms
Schneiderman: The Terms Of The Settlement Are Clear And They Will Be Enforced In New York State
NEW YORK — Attorney General Eric T. Schneiderman today announced his intention to sue Bank of America and Wells Fargo for repeatedly violating the terms of the National Mortgage Settlement. Signed in 2012, the Settlement required the five largest mortgage servicing banks in the United States to improve their customer service practices by complying with new mortgage servicing rules, known as the Servicing Standards. Among these are four standards dictating the timeline for banks to process mortgage modification applications. Attorney General Schneiderman’s office has documented 339 violations of those standards by Wells Fargo and Bank of America since October 2012.
In response to complaints from New York homeowners put at risk by these banks’ violations of the standards, Attorney General Schneiderman sent a letter to the parties that oversee the National Mortgage Settlement informing them that he intends to sue Wells Fargo and Bank of America. This would be the first time an Attorney General will have brought a legal enforcement claim under the auspices of the National Mortgage Settlement.
“The five mortgage servicers that signed the National Mortgage Settlement are legally required to take specific, rigorous, and enforceable steps to protect homeowners,” Attorney General Schneiderman said. “Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure. I intend to use every tool available to my office to hold these companies accountable under the terms of the National Mortgage Settlement.”
Last year, Attorney General Schneiderman joined 48 states, the Department of Justice and the five largest mortgage servicers in negotiating the settlement. The Agreement includes $25 billion for 49 states and mandated forms of consumer relief, such as mortgage modifications for at-risk homeowners, which could include lower-interest rates, forbearance agreements, and principal reductions.
The Settlement also includes 304 “Servicing Standards” which participating servicers are required to adhere to, and which are intended to make it easier for homeowners to seek loan modifications. The Servicing Standards were incorporated into the National Mortgage Settlement in order to address long standing complaints from consumers and advocates that servicers subject to the Settlement– Ally Financial/GMAC, JP Morgan Chase, Citibank, Bank of America and Wells Fargo—persistently failed to provide fair and timely services to their customers.
The Servicing Standards include: a prohibition against dual tracking (the practice of negotiating a loan modification with a borrower while simultaneously pursuing foreclosure); a requirement that every customer requesting assistance be assigned a single point of contact; and four requirements that dictate the timeline in which the servicers must respond to customers who are actively seeking loan modifications.
The Settlement Agreement also provides that any party to the Settlement may bring an enforcement action in U.S. District Court for the District of Columbia following a 21-day notice to the Monitoring Committee set up to enforce the agreement. During the 21-day notification period, the Committee may choose to pursue the litigation on behalf of the party using the Committee’s own authority under the Settlement, or they may defer action. If the Committee defers then the complaining party may pursue the legal claim on their own after waiting an additional 21 days.
On Friday, Attorney General Schneiderman sent a letter to the Monitor, Joseph Smith, and to each member of the Monitoring Committee notifying them of his intention to bring a legal claim if the Committee does not act. The letter includes written complaints against Bank of America and Wells Fargo, and a significant amount of back up documentation demonstrating the severity of the violations. Schneiderman intends to ask the court to impose injunctive relief and to require strict compliance under the Settlement.
“We appreciate Attorney General Schneiderman’s efforts to hold the big banks accountable to communities,” said Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project. “The banks are systematically violating the terms of the National Mortgage Settlement, and we hope this action by the AG will push other state and federal regulators to draw a line in the sand against abusive mortgage servicing practices.”