N.Y. AG to sue Wells Fargo, Bank of America over mortgage settlement violations

NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced his intention Monday to sue Wells Fargo and Bank of America for allegedly engaging in repeated violations of the terms of the National Mortgage Settlement.

Schneiderman's office has documented 339 alleged violations of new mortgage servicing rules, known as the servicing standards, by Wells Fargo and Bank of America since October. The National Mortgage Settlement was signed last year and required the five largest U.S. mortgage servicing banks to improve their customer service practices with the servicing standards.

Schneiderman sent a letter to the parties overseeing the National Mortgage Settlement informing them of his intent to sue Wells Fargo and Bank of America in a response to complaints from New York homeowners. The lawsuit would represent the first attorney general 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," 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."

Schneiderman alleges that Wells Fargo and Bank of America violated four servicing standards related to the timeline for processing mortgage modifications. The alleged violations include failure to provide borrowers with written acknowledgement of a receipt of a loan modification application within three business days or receipt, failure to notify borrowers of all missing documents or deficiencies in applications within five business days of receipt of the borrower's initial loan modification application, failure to give borrowers 30 days to submit missing documentation or correct deficiencies and failure to make decisions on a complete loan modification application within 30 days.

The National Mortgage Settlement provides that any party to the settlement may bring an enforcement action following a 21-day notice to a monitoring committee set up to enforce the agreement. During the notification period, the committee may pursue the litigation on behalf of the party using its own authority or the committee may defer action. If the committee defers, the complaining party may pursue the legal claims on its own after waiting an additional 21 days.

Schneiderman intends to request that the U.S. District Court for the District of Columbia impose injunctive relief and require strict compliance under the settlement.