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From Banking and Finance Law Daily, October 2, 2013

New York A.G. to sue Wells Fargo to enforce National Mortgage Settlement, reaches agreement with BoA

By Charles A. Menke, J.D.

New York Attorney General Eric Schneiderman announced his office will file suit against Wells Fargo to compel compliance with the National Mortgage Settlement. At the same time, Schneiderman stated his office reached an agreement to suspend a similar enforcement action against Bank of America, which has agreed to implement a number of substantial, systemic reforms intended to ensure that the servicing standards outlined in the National Mortgage Settlement are honored throughout New York.

"While Bank of America has chosen to work with us to take the steps required to adhere to their commitments, Wells Fargo has taken a different path,” Schneiderman said. “Both of these cases should send a strong message that the big banks must comply with the legally binding Servicing Standards negotiated in the National Mortgage Settlement, or face the consequences."

Wells Fargo. Schneiderman previously announced his intention to sue Wells Fargo and Bank of America last May, after documenting hundreds of violations of the servicing standards outlined in the National Mortgage Settlement. According to Schneiderman, after months of negotiations, Wells Fargo declined to sign any agreement aimed at improving its customer service practices.

"Wells Fargo's violations of the servicing standards has been documented by direct service providers across New York State," said Kirsten Keefe of the Empire Justice Center. "Wells Fargo's refusal to commit in writing to common-sense reforms that every mortgage servicer should be following already is sad and shameful. Wells Fargo's business practices are hurtful to its customers who should be getting resolutions but will continue to suffer frustrations with litigation pending."

Schneiderman specifically alleges that Wells Fargo repeatedly violated the settlement by failing to:

  • acknowledge receipt of application documents;
  • notify borrowers of document deficiencies;
  • allow borrowers the required 30 days to supplement missing information in loan modification applications;
  • make timely decisions on loan modification applications; and
  • promptly convert trial loan modifications to permanent modifications.

Schneiderman additionally points out that Wells Fargo’s noncompliance is not isolated to New York, and that borrowers in other states confirm Wells Fargo’s numerous violations of the settlement.

Bank of America. Meanwhile, the agreement reached with Bank of America aims to correct many of the underlying issues that prevented full compliance with the National Mortgage Settlement. Under the terms of the agreement, Bank of America has agreed to:

  1. Designate high-level staff with decision-making authority to every housing counseling and legal services agency that is part of the New York Attorney General's Homeowner Protection Program. The senior Bank of America staffers will work with these agencies to reach prompt resolution on all pending or delayed loan modification requests.
  2. Redesign its "missing documents" letter to ensure that this communication is clear, and that borrowers know exactly what information is needed to move forward with a loan modification request. The letter revisions will be done in consultation with Schneiderman’s office.
  3. Stop transferring servicing rights on New York mortgages to third parties when borrowers are already in negotiations for a loan modification with Bank of America staff or are making trial payments on a loan modification.
  4. Grant borrowers' attorneys permission to negotiate loan modifications with Bank of America staff directly, as opposed to the bank's outside foreclosure lawyers, who often are removed from the loan modification and loss mitigation process.

The New York Attorney General reserves the right to resume legal action if Bank of America fails to fully comply with the settlement terms.

Companies: Bank of America; Wells Fargo

LitigationEnforcement: Mortgages NewYorkNews

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