New York Attorney General Eric Schneiderman plans to sue Wells Fargo (WFC) for violating the 2012 National Mortgage Settlement and has reached an agreement with Bank of America (BAC) to comply with several new mortgage servicing standards.
Both companies have failed to satisfactorily reform their loan modification and foreclosure practices under the terms of the settlement, Schneiderman said at a Wednesday press conference. "They receive more servicing complaints" than any other lender in New York, he said.
But while Bank of America agreed to make changes to its loan modification process after his office put both lenders on notice in May, he said, Wells Fargo dropped out of negotiations. "This is the story of one bank that did the right thing and one bank that didn't," he said.
Catherine Pulley, a spokeswoman for Wells Fargo, said the bank had "voluntarily taken steps to put into place all of the customer service changes that would have been part of an agreement with the New York attorney general." The bank is committed to the 2012 settlement, she said.
According to Schneiderman, the aim of his lawsuit is to persuade Wells Fargo to comply with the conditions to which Bank of America has agreed.
Bank of America will stop selling the servicing rights on mortgages of New York borrowers who are already in the process of modifying their loans. This goes beyond the national settlement, which only required that contracts for servicing sales obligate the new servicer to continue processing a mod request.
The company also agreed to use clearer language in letters that notify homeowners about missing documents; permit borrowers' attorneys to negotiate loan modifications directly with bank staff rather than with the bank's outside foreclosure lawyers; and appoint a high-level staff member with the power to close deals with each of New York State's housing counseling and legal services agencies in order to expedite the loan modification process.
A Sept. 25 letter from Wells Fargo to Schneiderman, provided by the attorney general's office, says the bank will voluntarily make a number of similar changes, such as "refinement and enhancement of customer communication regarding missing information." Pulley, the spokeswoman, said Wells would designate Wells Fargo resolution managers to work with state counselors and legal services, another provision echoed in the B of A agreement.
The Wells letter says nothing about allowing borrower lawyers to negotiate directly with bank staff or restricting the sale of servicing rights, however. Nor does the letter spell out how Wells would implement and monitor the standards, whereas the signed agreement with B of A goes into detail about both.
According to Matt Mittenthal, the press secretary for Schneiderman, a sticking point was Wells' refusal to commit to an enforceable agreement in writing, unlike Bank of America. The Bank of America agreement would allow the attorney general to sue the company if it failed to comply with the new conditions.
Schneiderman said the standards in the agreement are targeted at streamlining the often-byzantine servicing process that can doom homeowners already in danger of foreclosure. When bureaucrats drag their feet on loan modifications, borrowers pay the price with mounting fees, penalties and interest, he said.
"The Rolling Stones had it wrong," he said: homeowners facing foreclosure "do not have time on their side."