Bank of America: 'Surprised and disappointed' by N.Y. AG's plans to sue over mortgage settlement

By Jessica M. Karmasek | May 14, 2013

NEW YORK (Legal Newsline) -- Bank of America Corp., responding to New York Attorney General Eric Schneiderman's allegations last week that the bank has violated last year's $25 billion nationwide mortgage settlement, says Schneiderman can't sue until the bank is given time to "cure" any potential violations.

On May 6, the attorney general announced his intention to sue both Wells Fargo and Bank of America for allegedly engaging in repeated violations of the terms of the settlement.

In February 2012, 49 state attorneys general, including Schneiderman, and federal officials reached a deal with Wells Fargo & Co., JPMorgan Chase & Co., Citigroup Inc., Ally Financial Inc. and Bank of America.

The agreement institutes new protections for homeowners and nationwide reforms to mortgage servicing standards.

In a news release last week, Schneiderman said his office has documented 339 alleged violations of new mortgage servicing rules, known as the servicing standards, by the two banks since October.

Of those 339 alleged violations, the attorney general said Bank of America alone allegedly failed to satisfy its obligations under the settlement in 129 instances.

"Bank of America was surprised and disappointed to learn for the first time through the May 6 letter and attendant press coverage about your belief that Bank of America is engaging in 'a persistent pattern of non-compliance under the National Mortgage Settlement' and 'flagrant violations' of the loan modification timeline requirements in the National Mortgage Settlement Servicing Standards," wrote the law firm of Wachtell, Lipton, Rosen & Katz, which sent a three-page response on behalf of the bank to Schneiderman May 7.

The bank said there was "never any suggestion" that there was any concern that it had engaged in violations or any "pattern" of violation.

Bank of America also noted in the letter to Schneiderman that neither information about the 129 complaints nor the "extensive back-up documentation" referenced in the attorney general's May 6 letter -- sent to the Monitoring Committee of the National Mortgage Settlement -- has been provided to it.

"Moreover, your press release and letter contain no indication of the manner in which your office believes that the handling of any of these 129 instances may not have complied with any aspect of the National Mortgage Settlement, and provide no support or evidence of any violation," the bank wrote.

Bank of America contends that Schneiderman's letter to the monitoring committee is "procedurally defective" and should be disregarded.

"As the National Mortgage Settlement makes clear, an enforcement action may be brought only 'to enforce the obligations of servicer and to seek remedies for an uncured potential violation for which servicer's time to cure has expired,'" the bank explained in its letter.

"Bank of America has not committed any potential violations with respect to any of the servicing standards referenced in your letter (as it has complied with every applicable metric under the National Mortgage Settlement as of the most recent reporting date, as noted above), let alone failed to cure those potential violations in accordance with the terms and conditions of Exhibit E; indeed, no charge of any such violation is advanced by your letter.

"In addition, the National Mortgage Settlement is quite clear that only a failure to comply with the defined metrics can give rise to any suit (whether by the monitoring committee or a signatory state) which is exclusively within the jurisdiction of the federal court in the District of Columbia that approved the settlement, and even then only after an opportunity to cure has been provided."

Read the bank's full letter to the attorney general here.

The bank said it wants Schneiderman to publicly withdraw his notice of intent to sue.

A spokesman for the attorney general told the Wall Street Journal Friday that the office plans to proceed with its suit.

"As our letter to the monitor makes clear, we have the right to bring a suit against parties that violate the servicing standards and will do so," spokesman Damien LaVera said.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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