New York’s top prosecutor is poised to sue Bank of America and Wells Fargo over claims that they violated terms of a $26 billion mortgage settlement, according to several people briefed on the matter.
Eric T. Schneiderman, New York attorney general, paved the way on Monday for a lawsuit against both banks for “repeatedly violating†the terms of the National Mortgage Settlement, a sweeping pact brokered last year between five of the nation’s biggest banks and 49 state attorneys general over foreclosure abuses. The move by Mr. Schneiderman is the first time that an attorney general has readied a lawsuit against one of the five participating banks for running afoul of the settlement. More attorneys general could follow Mr. Schneiderman’s lead.
Under the terms of the settlement, which was aimed at halting the housing market’s downward slide and providing relief to languishing homeowners, the banks had to improve their servicing standards. The guidelines outline more than 300 servicing standards that each bank must follow when working with struggling homeowners. Those terms include notifying borrowers within five days that the banks have received necessary documents to complete a loan modification.
Such servicing standards were heralded as much-needed relief for homeowners who were ensnared in a maddening bureaucratic maze when seeking foreclosure relief. Homeowners seeking help with their mortgage were often unable to get through to a bank representative. Other times, they were asked repeatedly for the same documents multiple times.
When the settlement was being hashed out last February, housing advocates seized on the servicing standards as a crucial element of the settlement, but some doubted whether they would be backed by state and federal muscle.
Since October 2012, Mr. Schneiderman’s office, according to the people familiar with the matter, have documented 210 separate violations against Wells Fargo and 129 against Bank of America.
The mortgage settlement emerged from an investigation into mortgage servicing by all 50 state attorneys general that was introduced in the fall of 2010 amid an uproar over revelations that banks evicted people with false or incomplete documentation.
Wells Fargo and Bank of America could not be immediately reached for comment.
