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NY AG sues Wells Fargo, reaches accord with Bank of America
New York's top prosecutor has sued Wells Fargo and reached an accord with Bank of America over allegations that the two banks violated terms of a $25 billion settlement over mortgage abuses.
The most critical problems involve delays in processing homeowners' requests for help, state Attorney General Eric T. Schneiderman said at a news conference Wednesday.
"If you are a homeowner and your efforts to modify your mortgage are being delayed, fees and penalties mount up and it becomes harder and harder to get yourself out from underwater," he said.
The legal action against Wells Fargo was filed Wednesday in federal district court in Washington, D.C., in the hopes that a federal judge will force the bank to "honor its commitments" under last year's settlement, according to the attorney general's office.
'Worst records of violating'
In a statement, a Wells Fargo spokeswoman said the lender has already made the changes that would have been part of an agreement with the attorney general.
A spokeswoman said the bank has completed 26,000 loan modifications in New York and believes "a collaborative approach -- not protracted litigation -- offers the best path toward continuing to improve services to borrowers."
A spokesman for Bank of America said the lender has already offered assistance to hundreds of thousands of homeowners nationwide, and the agreement will "continue to improve the experience for our eligible customers."
Last year, Wells Fargo and Bank of America were among five major lenders that reached a settlement with state and federal agencies, including the New York attorney general, in which they promised to overhaul their foreclosure practices.
The attorney general said Wednesday that the two banks had "the worst records of violating the servicing standards set forth in the national mortgage settlement." Wells Fargo, the nation's largest mortgage servicer, refused to agree to mandatory changes in its foreclosure practices, Schneiderman said Wednesday.
By contrast, he said, Bank of America promised to reform its practices. The attorney general can take action against the lender if it falls short of its promises within 120 days, according to the agreement.
LI foreclosures on the rise
Bank of America will allow homeowners' counselors and attorneys to negotiate with staffers who have decision-making authority, and the bank will communicate more clearly with homeowners when documents are missing, among other changes, the agreement states.
Long Island's foreclosure rate has risen dramatically, with lenders making 12,271 initial foreclosure filings in the first eight months of this year -- a 53 percent increase over the same period last year, according to data from LI Profiles, a real estate information firm in Brightwaters.
Ronni Tomasini, a 52-year-old classroom aide who lives in Garden City Park, said she has spent years trying to get her Bank of America mortgage modified.
Tomasini's husband, Peter, died of colon cancer in 2007, at age 53. By 2009, she was no longer able to make the full monthly mortgage payments of about $2,800, so she asked for a loan modification. The bank sued to foreclose later that year.
'I hate living life like this'
In August, Bank of America offered a trial modification with a monthly payment of $1,924. The 40-year loan carries a 2 percent interest rate for five years and defers $100,000, the most generous offer possible, a bank spokeswoman said.
Even with income from a new second job and contributions from her sons -- a college student and a New York City police officer who share the four-bedroom home -- the new payment leaves no funds for emergencies, Tomasini said.
Unless the payment can be lowered further, she will need to sell the home and move in with a friend who is seriously ill, she said.
"I'm so scared," she said. "I hate living life like this."
Help for homeowners
New York Attorney General Eric T. Schneiderman has set aside $60 million from the $25 billion national mortgage settlement to fund housing counseling and legal assistance for homeowners in distress.
For information about housing counseling and legal help, visit http://www.aghomehelp.com/ or call 855-HOME-456.