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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