New York State Attorney General Eric T. Schneiderman plans to sue Wells Fargo and Bank of America for alleged violations of the national mortgage settlement, he announced Monday. Schneiderman said his office has documented 339 instances where the banks failed to adhere to standards designed to protect borrowers who seek loan modifications.
"Wells Fargo and Bank of America have flagrantly violated their obligations under the settlement," Schneiderman said at a news conference in Manhattan. He said homeowners are getting trapped in a dizzying array of complex rules and paperwork by "banks who in some cases never even bother to respond or correct errors in applications for mortgage modifications."
On April 29 Schneiderman informed a committee of attorneys general that he intended to enforce the rules by suing the banks in federal court in Washington, D.C., following a required 21-day notification period.
In a wide-reaching national settlement, five big banks last year agreed to pay $25 billion and to follow terms that included loan servicing standards intended to protect homeowners. Schneiderman said the banks had violated four provisions regarding loan modification deadlines. The standards are intended to speed up the process to prevent homeowners from racking up fees that can devastate their equity, while still giving them sufficient time to respond.
John Batanchiev, staff attorney at the nonprofit Long Island Housing Services, said loan modifications that before the settlement could take a year or more are now getting done more quickly but problems remain. One client facing foreclosure in Amityville filed for a loan modification and was told to provide documents that were unavailable and would take longer than 30 days to procure. Batanchiev said that initially Bank of America said this was OK but then changed its mind and sold the loan to another servicer; now the client will need to file a new loan modification application.
"When you're told you have to start from scratch, it's just very frustrating," he said. "It keeps everything in limbo, because now he has to wait longer to get an answer."