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From Banking and Finance Law Daily, May 6, 2013

New York AG Intends to Sue Wells Fargo, BoAfor Mortgage Settlement Violations

By Sarah Borchersen-Keto, Washington News Bureau

New York Attorney General Eric Schneiderman said he intends to sue Wells Fargo and Bank of America for repeated violations of last year’s $25 billion National Mortgage Settlement, specifically with regard to loan modification timeline requirements. This marks the first time an Attorney General has brought a legal enforcement claim as a result of the settlement.

“I intend to use every tool available to my office to hold these companies accountable,” Schneiderman said May 6, 2013. The Attorney General’s office said it has documented 339 instances since October 2012 in which the banks failed to meet their obligations.

According to the Attorney General’s office, violations of the settlement timeline standards increase the chance that distressed homeowners will lose their homes as they fall deeper into arrears. Additional fees, penalties, and interest accrue during periods of delay, the office noted, which makes a modification more difficult and pushes homeowners closer to the possibility of foreclosure.

Schneiderman has written to the settlement monitor, Joseph Smith, as well as the Monitoring Committee, notifying them of his intention to bring legal action if the Committee does not act. Under the Settlement Agreement, any party to the settlement may bring an enforcement action in the U.S. District Court for the District of Columbia following a 21-day notice to the Monitoring Committee.

The Committee can choose to pursue the litigation on behalf of the party, using their own authority under the settlement, or they can defer action. If they choose to defer, then the complaining party can pursue legal action after waiting an additional 21 days.

Schneiderman said that if his office does pursue legal action on its own behalf, he intends to ask the court to impose injunctive relief and to require strict compliance under the settlement.

Commenting on Schneiderman’s announcement, Bank of America noted, “Through March we have provided relief for more than 10,000 New York homeowners through the National Mortgage Settlement, totaling more than $1 billion. Attorney General Schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address. This agreement has been good for New York, and we continue using these beneficial programs to assist troubled homeowners in New York and nationally. ”

Wells Fargo responded that “[it] is committed to full compliance with the National Mortgage Settlement and its associated standards. It is unfortunate that the New York Attorney General has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process. We fully support the rules established under the Settlement and we will continue to provide transparency into the progress we are making to provide relief to consumers. Wells Fargo has helped more than 70,000 homeowners across the country through National Mortgage Settlement Programs and we will continue to do everything we can to help all borrowers, including the New York families described today.”

MainStory: TopStory Mortgages

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