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NY to Sue: BofA, Wells Fargo Violated $25 Bn. Mortgage Settlement

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By William Peacock, Esq. on May 08, 2013 4:11 PM

Last year, 49 attorneys general from 49 states came to a landmark $25 billion settlement agreement with the nation’s biggest banks. The agreement was reached after the individual states looked into foreclosure paperwork and process abuses, such as robo-signing, that were costing some consumers thousands of dollars in fees, and other consumers, their homes.

Surprisingly or not, the banks that perpetrated the “sloppy” or “corrupt” practices (opinions vary) haven’t completely cleaned up their act and, in response, a few states are planning to take action.

New York Plans to Sue

On Monday, New York Attorney General Eric T. Schneiderman announced plans to file a lawsuit against Bank of America and Wells Fargo over alleged breaches of the landmark settlement agreement. According to The New York Times, the banks are required to abide by 304 servicing standards, including notifying homeowners of missing documents within five days. That alone can save the homeowner late fees and avoid missed deadlines.

Since October 2012, the state has documented 210 separate violations involving Wells Fargo and 129 involving Bank of America.

Massachusetts Investigating, Notifying Settlement Monitor

Instead of jumping into litigation, Massachusetts Attorney General Martha Coakley is planning on handing things through the established dispute resolution process first. Her office notified the settlement monitor, Joseph A. Smith, about "recurring issues" with mortgage servicers. According to the Times, a lawsuit is a possibility if the dispute resolution process fails.

How Big is the Problem?

Richard G. Simon, a spokesman for Bank of America, pointed out that the bank has provided relief for more than 10,000 New Yorkers. He also noted, "Attorney General Schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address."

That's 129 known slip-ups out of how many applications? If they've helped 10,000 people, there were surely many more that applied, yet were ineligible.

Wells Fargo, on the other hand, stated that it had helped 70,000 homeowners (though it is unclear if that is a New York figure or a national one). The bank's spokeswoman, Vickee J. Adams, stated, "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."

Though the number of known processing errors is pretty minute, that's only the homeowners who complained to the state's Attorney General's office. The true number is likely higher. Still, it remains to be seen which path was wiser: dispute resolution or litigation.

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