New York State Attorney General Eric T. Schneiderman announced that he is suing Wells Fargo so that a federal judge will compel the bank to honor its commitments under the 2012 National Mortgage Settlement. At a press conference in New York, Attorney General Schneiderman also announced that his office has reached an agreement to suspend a similar enforcement action against Bank of America, which has agreed to implement a robust set of systemic reforms intended to ensure that the servicing standards outlined in the National Mortgage Settlement are honored across New York State. If the reforms are successful, it is anticipated that Bank of America will replicate this initiative nationwide.
“While we have brought much needed relief to thousands of New Yorkers, too many homeowners in our state are facing unnecessary challenges as they fight to keep their homes,” said Attorney General Schneiderman. “While Bank of America has chosen to work with us to take the steps required to adhere to their commitments, Wells Fargo has taken a different path. Both of these cases should send a strong message that the big banks must comply with the legally binding Servicing Standards negotiated in the National Mortgage Settlement, or face the consequences.”
When implemented, the agreement reached with Bank of America will correct many of the underlying issues that have prevented full compliance with the National Mortgage Settlement. The agreement leaves open the option to resume legal action against Bank of America if it fails to comply with the new terms.
The National Mortgage Settlement includes 304 Servicing Standards that participating servicers are required to adhere to, and which include standards that are intended to make it easier for homeowners to seek loan modifications. The Servicing Standards were incorporated into the National Mortgage Settlement to address longstanding complaints from consumers and advocates that servicers subject to the Settlement– Ally Financial/GMAC, JP Morgan Chase, Citibank, Bank of America and Wells Fargo—consistently failed to provide fair and timely services to their customers.
Attorney General Schneiderman announced in his intention to sue Wells Fargo and Bank of America in May, after documenting hundreds of violations of the servicing standards outlined in the National Mortgage Settlement.
Violations of the timeline servicing standards increase the likelihood that distressed homeowners will lose their homes because the longer mortgage modifications are delayed, the deeper homeowners fall into arrears. Additional fees, penalties and interest accrue during periods of delay, making modifications more difficult and pushing homeowners closer to the brink of foreclosure.
Under the terms of the new agreement, Bank of America has committed to:
►Designate high-level staff with decision-making authority to every housing counseling and legal services agency that is part of the Attorney General’s Homeowner Protection Program. The senior Bank of America staffers will work with these agencies to reach prompt resolution on all pending or delayed loan modification requests.
►In consultation with the Office of the Attorney General, Bank of America will redesign its “missing documents” letter to ensure that this communication is clear, and that borrowers know exactly what information is needed to move forward with a loan modification request.
►Bank of America will stop transferring the servicing rights to third parties on New York mortgages when borrowers are already in negotiations for a loan modification with Bank of America staff or are making trial payments on a loan modification.
►Bank of America will grant borrowers’ attorneys permission to negotiate loan modifications with Bank of America staff directly, as opposed to the bank’s outside foreclosure lawyers, who typically are far removed from the loan modification and loss mitigation process.
The agreement makes clear that if Bank of America fails to fully comply with these terms, the Attorney General reserves the right to resume legal action.
These efforts in New York initiated by Attorney General Schneiderman are complimentary to work being carried out nationally by the members of the National Mortgage Settlement Monitoring Committee. Though the roles and method for enforcement are different, all parties are working toward the same goal of holding mortgage servicers accountable and bringing about expedited relief for homeowners who continue to struggle in the wake of the foreclosure crisis.
The Attorney General gave ample time to Wells Fargo to agree to similar reforms, but after months of negotiations, the bank declined to sign any agreement aimed at improving its customer service practices.
“Wells Fargo’s violations of the servicing standards has been documented by direct service providers across New York State,” said Kirsten Keefe of the Empire Justice Center. “Wells Fargo’s refusal to commit in writing to common-sense reforms that every mortgage servicer should be following already is sad and shameful. Wells Fargo’s business practices are hurtful to its customers who should be getting resolutions but will continue to suffer frustrations with litigation pending.”
Christie Peale, executive director of the Center for New York City Neighborhoods, said, “Since the beginning of the financial crisis, New Yorkers struggling to pay their mortgages have had to navigate byzantine processes to save their homes. It is gratifying to see Bank of America commit to these meaningful changes that will deliver resolution and relief to homeowners who have been stuck in limbo for too long. Homeowners and their advocates have long called for good faith negotiations with banks—and for a true partner in government to ensure those negotiations are honored. New Yorkers are incredibly lucky to have such a partner in Attorney General Eric Schneiderman.”
“Despite the clear servicing standards outlined in the National Mortgage Settlement, too many Wells Fargo customers still must navigate months of needless delay, lost paperwork and wrongful denials in trying to obtain an affordable, sustainable mortgage modification,” said Meghan Faux of South Brooklyn Legal Services. “We applaud AG Schneiderman for his aggressive enforcement of the National Mortgage Settlement and his leadership in bringing transparency and fairness to mortgage servicing. Accountability to the servicing standards is critical to preventing wrongful foreclosures and the housing crisis.”
“For too long, homeowners in New York and around the country have been struggling as the big banks fail to honor the commitments they made in the National Mortgage Settlement,” said Ira Rheingold, Executive Director of the National Association of Consumer Advocates. “Every day that a struggling homeowner has to go back and forth with their mortgage servicer is a day they fall further behind and a day closer to needlessly losing their home. I am pleased that Bank of America has agreed in writing to take real steps to adopt systemic changes that will help them honor their commitments, and applaud Attorney General Schneiderman for taking Wells Fargo to court to get them to do the same.”
The violations of the servicing standards were documented by the network of legal service providers and housing counselors funded under the Homeowner Protection Program (HOPP) created by Attorney General Schneiderman in June 2012. Using a portion of the funds New York State received under the terms of the National Mortgage Settlement, the Attorney General committed $60 million over three years to 35 legal services organizations and 59 housing counseling agencies statewide.