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NY AG Schneiderman Dons Capitalist Cape, Will Sue Wells Fargo Over Foreclosure Settlement Abuses

Eric Schneiderman
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New York Attorney General Eric Schneiderman is bringing forward a lawsuit against Wells Fargo which claims the nation’s largest home lender flouted the terms of its multibillion dollar settlement aimed at stopping foreclosure abuses.  The lawsuit aims to force compliance with the principles agreed upon in the settlement.  It would represent the first time a state Attorney General has sued one of the five banks involved in the national settlement

The lawsuit, which is expected to be filed as early as Wednesday, accuses Wells Fargo of violating the guidelines of a broad agreement reached last year between five of the nation’s largest banks and 49 state attorneys general.

Under that deal, the banks must comply with 304 servicing standards. The guidelines map out how banks should field and process requests from distressed homeowners.

In a statement Schniederman told the Associated Press:

”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,” Schneiderman said. “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.”
The move comes as the Department of Justice is in extensive negotiations with J.P. Morgan Chase over the standards it has used in selling mortgage-backed securities since the financial crisis.  Early reports show that the bank may have to pay as much as $11 billion.  If the DOJ moves forward with the agreement it could be used as the basis for settlements with other financial institutions.  

Wells Fargo officials have denied all wrongdoing and are arguing that they have complied with the terms set forth by the national settlement:

“We are continuously implementing additional customer-focused measures based on the constructive feedback we receive from our customers, the Monitoring Committee and individual states,” it said in a statement. “We have has been a leader in preventing foreclosures and helping families maintain home ownership with more than 880,000 modifications nationwide.”

While AG Schneiderman has had success dealing with Bank of America he has not found Wells Fargo to be as accommodating.  The lawsuit comes after stalled and failed negotiations between the two parties, according to NYT:

For Wells Fargo, though, the discussions with the New York attorney general’s office resulted in a standoff. Mr. Schneiderman’s office, people briefed on the matter said, had pushed Wells Fargo to acknowledge a systematic pattern of mortgage servicing errors and to commit to a new agreement codifying changes to the way the bank services mortgages. Wells Fargo balked, the people said, and the talks broke down last week.

Amid the languishing talks, the bank sent a letter to Mr. Schneiderman’s office, reiterating its commitment to “helping borrowers maintain homeownership and achieve long-term financial success,” according to a copy of the letter reviewed by The Times.

Mr. Schneiderman had found 210 separate violations involving the bank and 96 borrowers. Four of those borrowers, the letter said, were not Wells Fargo customers. In its letter, the bank said it “disagrees with allegations” related to the remaining borrowers. Of the remainder, the bank has approved loan modifications for 39 customers and made a final decision on the loan modification applications for 28 others. Beyond helping the homeowners identified by the attorney general’s office, Wells Fargo voluntarily improved its processes, the bank argued in its letter.

Those concessions apparently did not appease Mr. Schneiderman’s office. Part of the problem, the people briefed on the matter said, was that Wells Fargo refused to improve their processes in a formal agreement.


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