NY AG Initiates Lawsuit Over Mortgage Settlement Violations

mortgage ratesBank on It- All Is Not Well (s)

In the words of the great Yogi Berra, ‘It’s deja vu all over again’ for the banking industry.

From the release:

“New York Attorney General Eric T. Schneiderman today announced his intention to sue Bank of America and Wells Fargo for repeatedly violating the terms of the National Mortgage Settlement. Signed in 2012, the Settlement required the five largest mortgage servicing banks in the United States to improve their customer service practices by complying with new mortgage servicing rules, known as the Servicing Standards. Among these are four standards dictating the timeline for banks to process mortgage modification applications. Attorney General Schneiderman’s office has documented 339 violations of those standards by Wells Fargo and Bank of America since October 2012.”

According to a press release by his office, Attorney General Schneiderman sent a letter to the parties that oversee the National Mortgage Settlement informing them that he intends to sue Wells Fargo and Bank of America. This would be the first time an Attorney General will have brought a legal enforcement claim under the auspices of the National Mortgage Settlement.

Attorney General Schneiderman took the unusual step of highlighting one personal example. “The problem is all too real for Joyce and Alton Harden who have lived in their home in the Rockaways for 35 years, and who have been trying to negotiate with Wells Fargo for a loan modification for the past three years. After suffering a series of setbacks, starting with an on-the-job injury that kept Mr. Harden out of work for several months, and culminating with suffering massive damage to their home when Hurricane Sandy hit, the Hardens ended up in foreclosure. The Hardens reached out to MFY Legal Services who helped them prepare a full loan modification package that was submitted to Wells Fargo in early March.”

“Under the Settlement, Wells Fargo is required to respond to the loan modification request within 30 days. Despite that requirement, the Hardens did not hear a word back until late last week when Wells Fargo wrote to ask them to start the process over again and to resubmit a new application. Meanwhile the Hardens remain in foreclosure, uncertain about their future and desperate to move past this process.”

More reactions:

“When it comes to customer service, the “Too Big To Fail” banks often seem to be “Too Big to Succeed””, said Ken Wells, EVP-Relationship Marketing with Truebridge, Inc.  “With the massive scope of the National Mortgage Settlement agreement being executed by the huge bureaucracy of the “Big Banks” along with a hastily organized settlement administration group, its inevitable that there will be some percentage of mishandled accounts. But each of those errors directly affect the lives of people who are struggling already, creating the potential for public outcry. And once again, the concern in our industry is that community banks and credit unions will get painted with the same broad brush by the public.”

Said public relations executive David Kowal: “The AG’s office complains about the “bureaucratic quagmire” that homeowners have to wade through, but how could it be otherwise?  Under the terms of the settlement, banks have to comply with 304 servicing standards.  More paperwork for banks means more paperwork for homeowners. Think about the amount of paperwork involved in any mortgage.  The average homeowner has writer’s cramp for a week after signing all of the paperwork.  Now add on the 304 servicing standards included in the agreement.  It’s a wonder that any mortgages are ever processed flawlessly.”

The New York Times reported the following statements from the two banks: “Through March we have provided relief for more than 10,000 New York homeowners through the National Mortgage Settlement, totaling more than $1 billion,” said Richard G. Simon, a spokesman for Bank of America.

Wells Fargo is “committed to full compliance with the National Mortgage Settlement and its associated standards,” according to Vickee J. Adams, a Wells Fargo spokeswoman. She added that “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.”

Click here for the full press release.

 

About Steve Viuker

Steve Viuker is a Brooklyn, New York business journalist. He has covered real estate, small business and banking for numerous national online and print media.

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