Back in February of last year, we posted about the $25 billion settlement between the federal government, 49 states, and the nation’s largest mortgage servicers. As part of this settlement, New York received $136 million. This week, New York Attorney General Eric Schneiderman said at a news conference that “Wells Fargo and Bank of America have flagrantly violated their obligations under the settlement,” reported Bloomberg and other news sources. The Attorney General’s website announces that office’s “intention to sue Bank of America and Wells Fargo for repeatedly violating the terms of the National Mortgage Settlement.” The statement further provides:
In response to complaints from New York homeowners put at risk by these banks’ violations of the standards, Attorney General Schneiderman sent a letter to the parties that oversee the National Mortgage Settlement informing them that he intends to sue Wells Fargo and Bank of America. This would be the first time an Attorney General will have brought a legal enforcement claim under the auspices of the National Mortgage Settlement.
….The letter includes written complaints against Bank of America and Wells Fargo, and a significant amount of back up documentation demonstrating the severity of the violations. Schneiderman intends to ask the court to impose injunctive relief and to require strict compliance under the Settlement.
The New York Attorney General’s complaints against Bank of America and Wells Fargo involve four “servicing standards” “relating to the timeline for processing mortgage modifications,” and include failures to comply with requirements such as those providing that borrowers receive written acknowledgement of receipt of a loan modification application within three days and that servicers must give borrowers 30 days to submit missing documentation or correct a deficiency.
Bank of America and Wells Fargo aren’t the only ones dealing with headaches over the National Mortgage Settlement. The New York Times reported that Rust Consulting, who distributes checks to homeowners under the settlement, had bounced checks to homeowners or issued them in the wrong amounts. The Times further reported that:
With more than 50 federal contracts to its name, and its own political action committee spreading campaign donations across Washington, Rust has become a favored middleman for class-action lawsuits and government settlements.
But problems emerged soon after the settlement was announced in January. The consulting firm, officials said, was initially slow to alert borrowers to expected payments. Then, the officials say, Rust delayed the checks for weeks as it struggled to gear up for the payments.
Once Rust issued the first round of checks in April, it failed to move money into the bank account used for the settlement. The decision prevented some homeowners from cashing their checks.
Rust played down the mistake at first, saying in a private e-mail to banks that the “perceived issues” with a handful of checks lack “merit,” according to a copy of the e-mail reviewed by The New York Times.
But, in effect, the checks bounced. And after the incident, Rust lost significant credibility with the regulators, officials said.