NY AG to Sue BofA, Wells Fargo Over Mortgage Settlement Violations

NY AG to Sue BofA, Wells Fargo Over Mortgage Settlement Violations
Eric T. Schneiderman, New York’s attorney general.

New York’s Attorney General will become the first state top prosecutor to sue banks that are part of last year’s $25 billion National Mortgage Settlement for failing to improve their servicing standards under the terms of the agreement.
Eric T. Schneiderman, New York’s attorney general, said Monday that his office will file lawsuits against Bank of America and Wells Fargo for “repeatedly” violating the settlement’s rules.
Attorneys general from other states could also file similar lawsuits.
“The five mortgage servicers that signed the National Mortgage Settlement are legally required to take specific, rigorous, and enforceable steps to protect homeowners,”  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.”
The landmark agreement, finalized more than a year ago by federal authorities and 49 state attorneys general, was suppose to correct foreclosure and mortgage servicing abuses — including the infamous “robo-signing” of invalid documents — by five of the top U.S. lenders: BofA, Wells Fargo, JPMorgan Chase, Citi and Ally/GMAC.
On Friday, Attorney General Schneiderman sent a letter to the settlement’s monitor, Joseph Smith, and to each member of the Monitoring Committee, notifying them of his intention to bring lawsuits “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 said he intends to ask the court to impose injunctive relief and to require strict compliance under the settlement.
The settlement’s guidelines outline more than 300 servicing standards that each bank must follow when working with struggling homeowners facing possible foreclosure. Those terms include notifying borrowers within five days that the banks have received necessary documents to complete a loan modification.
Since October 2012, Schneiderman’s office has documented 210 separate violations involving Wells Fargo and 129 involving Bank of America, the Times reported.
Last month, consumer advocates in California reported that all banks under the National Mortgage Settlement were violating consumer protections under the agreement, including restrictions against “dual tracking” — the practice by a mortgage servicer of pursuing foreclosure while simultaneously working with a homeowner on a mortgage reduction plan.
Servicers were also failing to provide “Single Points of Contact” that are accessible, consistent and knowledgeable as required under the settlement, the California advocates said.
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4 thoughts on “NY AG to Sue BofA, Wells Fargo Over Mortgage Settlement Violations

  • May 6, 2013 at 3:41 pm
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    Bank of America Stock Explodes Higher After Reaching Critica:::What a ZOO!!!!!
    Shares of Bank of America (NYSE: BAC ) and mortgage-bond insurer MBIA (NYSE: MBI ) are exploding higher in afternoon trading after the companies said they will settle their ongoing legal battle over souring Countrywide-issued mortgage-backed securities insured by MBIA in the lead up to the financial crisis.
    According to The Wall Street Journal, Bank of America will pay MBIA $1.7 billion to end the particularly antagonistic dispute.
    The performance of both companies’ shares shows the relief investors are feeling upon hearing the news. For MBIA, it could even mean survival. The ailing insurance company has been on the brink of seizure from regulators since suffering massive losses related to MBSes that it insured prior to 2008. In its most recent 10-K, it bluntly noted that its ability to “meet liquidity requirements” within the requisite time frame was directly conditioned upon the outcome of this case and others like it.
    And for Bank of America, the news resolves a number of potentially thorny issues. In the first case, the $1.7 billion payment is roughly half of that demanded by MBIA in its lawsuit. In the second case, the agreement marks yet one more critical step for the bank as it attempts to atone for the sins of mortgage originator Countrywide, which it lamentably acquired in 2008. And finally, it puts to rest concerns that certain legal rulings in the MBIA case, which had recently gone against the bank, could negatively impact other cases, and thereby expose Bank of America to further untold billions of dollars in liability.
    Make no mistake about it, assuming the deal is fully and finally consummated, this is a huge step forward for both MBIA and Bank of America. The suit was one of the earliest filed after the financial crisis and is now one of the last remaining to be settled.
    Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell
    http://www.fool.com/investing/general/2 … eachi.aspx

  • May 10, 2013 at 8:16 pm
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    Well he needs to hurry and get it done, because from what I am reading on other forums these banks are selling off the loans they are supposed to modify as part of the National Mortgage Settlement. And he might want to ask where the checks are for the foreclosed homeowners, wait make that ex-homeowners.

  • May 11, 2013 at 8:41 am
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    Are your mortgage modification terms worth continuing!!!
    Financially strapped homeowners who are close to foreclosure may want to face the music now rather than continuing to struggle with their monthly payments. There’s a high probability of losing the house anyway, even with the government’s help.
    According to a new report, people who take advantage of a key federal program to modify their mortgages in an effort to save their homes are defaulting “at an alarming rate.”
    The report from the special inspector general for the Treasury Department’s Troubled Asset Relief Program doesn’t say why an inordinately high percentage of owners who take part in the Home Affordable Modification Program, or HAMP, are unable to maintain their loan modifications. The report says only that the longer owners remain in the program, the more likely they are to default again.
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    Even with permanently reduced loan payments, the number of owners who are “redefaulting” is rising, the inspector general says.
    At the end of the first quarter of 2013, the report found, nearly half the oldest of the HAMP modifications, from the third and fourth quarters of 2009, were going back into default.
    Specifically, 46% of the HAMP mods made in the third quarter of 2009 redefaulted and 39% from the fourth quarter flunked out. Even mods from 2010 had failure rates as high as nearly 38%, the report says.
    As of March 31, of the 1.28 million owners whose loans were modified under HAMP, more than 312,000 have gone into default again. And when that happens, the consequences are severe.
    Owners who cannot sustain their reworked loans and fall out of HAMP are left with the terms of the original mortgage. And as such, they are responsible for making up the difference between the original loan payment and the lower HAMP loan payment.
    Not only can the back payment be substantial, the inspector general advises, but already distressed owners can be hit with late fees on both the principal and interest that weren’t paid during the modification period.
    In some instances, the report cautions, redefaulting borrowers can end up owing more than they did before their loans were modified.
    The Obama administration’s signature housing support program, HAMP was created in 2009 to help owners avoid preventable foreclosure by encouraging the companies that administer their mortgages — so-called loan servicers — to find ways to lower their payments.
    Under the program, which was recently extended until Jan. 1, 2016, borrowers with loans made before 2009 whose monthly payments for principal, interest, taxes and insurance are more than 31% of their gross income are eligible. Generally, servicers reduce the borrower’s interest rate or extend the loan term to bring the payment down to an affordable and sustainable level.
    As a last resort, but only with the agreement of the investor that owns the loan and is the ultimate recipient of the principal and interest you pay every month, servicers may also forgive some of the amount still owed on the mortgage.
    But HAMP doesn’t subsidize troubled borrowers. Rather, it provides financial incentives to mortgage servicers that work with borrowers. More than $4 billion of the $7.3 billion in federal funds spent on housing support programs during the housing crisis was spent under HAMP alone.
    That raises the question of whether some servicers may be modifying loans they know will eventually fail just to earn fees from Uncle Sam. No one seems to have addressed that issue. But previous research yielded some interesting findings.
    For example, a study a few years back from the Federal Reserve Bank of New York found
    that the greater the payment reduction, the less the rate of recidivism. But many loan mods don’t lower the payment. Rather, many result in higher payments and higher balances because the payments owed plus any penalties and fees are added to the outstanding balance without changing other terms of the loan.
    On the other hand, the study found that the lowest redefault rates occurred when the payment reduction was paired with principal reduction. In other words, the servicer agreed to forgive some of what was owed. When their principal is reduced, the study found, problematic borrowers are four times less likely to default again.
    Other studies from the University of North Carolina and the Boston and Atlanta Federal Reserve Banks had similar findings: There’s a high correlation between redefaulting and loan mods in which the payments are stretched out and the debt is deferred — but not reduced.
    So the message for underwater borrowers considering a loan modification is this: Unless your servicer offers to rework your loan in such a way that you no longer owe more than the house is worth, think hard about what you are doing.
    Is there a real chance you can save your house? Or are you merely putting off the inevitable?
    http://www.latimes.com/business/realest … 9633.story

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