New York to sue BofA, Wells Fargo over mortgage practices | Reuters
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New York to sue BofA, Wells Fargo over mortgage practices | Reuters

New York to sue BofA, Wells Fargo over mortgage practices | Reuters

By Karen Freifeld and Aruna Viswanatha


May 6, 2013


Wells Fargo Advisors

Wells Fargo Advisors (Photo credit: Wikipedia)

(Reuters) – New York Attorney General Eric Schneiderman said on Monday he plans to sue Bank of America Corp (BAC.N) and Wells Fargo and Co (WFC.N) for violating the terms of a settlement designed to end mortgage servicing abuses.


Schneiderman issued the announcement, which suggests lawsuits could be filed against the banks within two months, ahead of a widely anticipated report from the monitor for the multi-state settlement, which is expected to be critical of banks.


The planned action is the first involving allegations that top banks, which agreed last year to provide $25 billion in relief to homeowners and comply with a set of servicing standards to atone for foreclosure misconduct, are not living up to their obligations under the deal.


Schneiderman said that, since last October, his office had documented 339 violations of standards – 210 by Wells Fargo and 129 by Bank of America – dictating the timeline for banks to process mortgage modification applications.


Schneiderman said he would seek injunctive relief and an order requiring the two banks to comply with the settlement. His statement did not say he was seeking damages or penalties.


But it is unclear how far Schneiderman can take his efforts, because they come outside the primary channel authorized by the settlement for any potential violations.


The settlement authorized the monitor to first work with a servicer to correct any potential violations and sue only if the servicer does not fix the errors.


In an afternoon news conference, Schneiderman acknowledged the authority provided to the monitor, but said he could still move forward.


“There is more than one cop on the beat,” he said.


The action draws further attention to the continuing plight of borrowers facing foreclosures some five years after the start of the housing crisis. Some borrowers say they wait months for word from their bank on a request to modify a loan, only to be told their paperwork has been lost.


It also highlights the banks’ lingering mortgage headache, even if this latest move might not result in significant additional monetary penalties.


“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” the attorney general said in a statement.


A spokeswoman for Wells Fargo declined to comment. Bank of America said in a statement that it takes seriously the allegations of servicing problems and will work quickly to address them.


Bank of America and Wells Fargo are among five banks that agreed to the settlement in February 2012. At the news conference, Schneiderman declined to say whether the other three banks – JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Ally Financial Inc – could face similar lawsuits, but said his announcement had “implications” for the other servicers.

Continue reading at New York to sue BofA, Wells Fargo over mortgage practices | Reuters.

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