New York sues Wells Fargo over mortgage settlement

New York: The New York attorney-general sued Wells Fargo for allegedly violating the terms of the $25 billion (Dh91.95 billion) national mortgage settlement by failing to provide timely relief to struggling homeowners.

Eric Schneiderman said he gave “ample” time to Wells Fargo to reform its practices and filed the lawsuit after months of negotiations yielded no changes to “improving its customer service practices.”

He is asking a federal judge to force the bank to make changes to its servicing practices intended to speed up modifications on loans to struggling borrowers.

Kristen Keefe of the Empire Justice Centre, which is working with the state attorney-general, called Wells Fargo’s refusal to modify its servicing practices “sad and shameful.”

Schneiderman said he did not follow through on a threatened lawsuit against Bank of America because it agreed to “systemic reforms” to aid homeowners, including allowing them to negotiate directly with the bank to modify their home loans, instead of using external foreclosure lawyers. BofA has 120 days to implement the changes or face possible legal action.

BofA said it was “pleased” to resolve the matter. Wells could not immediately be reached for comment.

The lawsuit is the first action to enforce the national mortgage settlement - a comprehensive settlement struck in 2012 with five leading banks, including BofA and Wells Fargo over their foreclosure practices. The banks agreed to pay $5.9 billion in cash payments to people who lost their homes and an additional $19.1 billion in loan restructurings as part of a deal with Department of Justice and state attorneys-general.

Schneiderman threatened to sue the two banks in May when he alleged publicly that they had failed to adhere to servicing agreements that are part of the settlement.

Specifically, he alleged BofA and Wells did not acknowledge receipt of loan modification applications within three business days, nor alert homeowners to missing documents in the application, nor give borrowers enough time to correct deficiencies, and failed to act on loan modification requests within 30 days. As a result, he alleged, the delays increased the likelihood that the homeowners would lose their homes as they faced additional fees and interest charges.

Schneiderman resisted agreeing to the national mortgage settlement for months, criticising the Obama administration for being too lenient. He did not sign on until after the administration announced a multi-agency task force to investigate the sale of mortgage-backed securities and made him co-chair of the programme.

— Financial Times