Wells Fargo (WFC) and Bank of America (BAC) have repeatedly violated the terms of a national pact that requires them to improve their mortgage servicing practices, New York Attorney General Eric Schneiderman alleged on Monday.

The attorney general said at press conference that he intends to sue the two banks over 339 different servicing failures documented by his staff and consumer legal service providers since October 2012.

Wells and B of A "flagrantly violated their obligations under the settlement," Schneiderman said at the press conference. "Banks in some cases never even bothered to respond to mortgage modification applications."

New York would take its action under a provision of the mortgage servicing settlement allowing states to pursue claims if the settlement monitor, Joseph Smith, does not choose to champion their complaints. On Friday, Schneiderman sent Smith examples of servicer misconduct along with "a significant amount of back-up documentation," he said.

The $25 billion national mortgage settlement, signed in February 2012 between 49 attorneys general, the federal government and the five largest servicers, was designed to address servicing abuses that led to the robo-signing of foreclosure documents. The settlement created new servicing standards that require better communication with borrowers, a single point of contact, adequate staffing levels and training, and new standards for executing documents in foreclosure cases.

Though it is the first action taken over alleged noncompliance with the settlement, Schneiderman's complaints echo well documented grievances of foreclosure attorneys and consumer advocates.

But Schneiderman's conference aimed to catapult these complaints into national headlines. The room was packed with the consumer legal service providers who gathered evidence of settlement violations for the attorney general's office. Some came with alleged victims of bank misconduct bearing fact sheets about their cases.

According to one complaint, Yenifer Olortiga fell behind on her mortgage payments after medical expenses related to her mother's cancer piled up.

In May 2012, she submitted a request for a modification to Bank of America, which failed to act on it and pursued foreclosure, according to Staten Island Legal Services. At a September settlement conference, the bank claimed it had no record of receiving the application, and asked Olortiga to resubmit, which she did. This cycle has continued through five modification applications, according to Olortiga and Staten Island Legal Services, adding that the most recent application was submitted in late March.

Though the attorney general's office claims to have found more than 300 violations of the settlement's terms between the two banks, a focus seems to be modifications. Under the terms of the settlement with banks, servicers must respond to modification requests within 30 days and promptly notify borrowers of any missing documentation. Since the settlement was signed, however, consumer advocates and foreclosure defense attorneys have repeatedly complained that servicers are not abiding by its terms.

More than 61% of the complaints were related to alleged servicing failures by Wells Fargo.

Consumer advocates appear to have played a significant role in assembling the case, with officials from the Neighborhood Economic Development Advocacy Project and Legal Services NYC Brooklyn quoted in the news release.

"Mortgage servicers routinely delay the process and effectively refuse to negotiate in good faith," said Megan Faux, acting director of Legal Services Brooklyn. Schneiderman's action would hold "servicers accountable to what they themselves agreed to do for homeowners," she said.

In a prepared statement, Bank of America said that it has provided some form of relief for more than 10,000 New York homeowners under the settlement. But, it added, "Attorney General Schneiderman has referenced 129 customer servicing problems, which we take seriously and will work quickly to address."

Wells Fargo took a more combative approach.

"It is unfortunate that the New York Attorney General has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process," a statement from the bank reads. "we will continue to do everything we can to help all borrowers, including the New York families described today."

Consumer advocates present for the hearing disputed that the banks had been acting in good faith. Josh Zinner, the director of the Neighborhood Economic Development Advocacy Project, cited recent comments by Wells Fargo chief executive John Stumpf that the bank was doing its best to help homeowners.

"We know, and the people on the ground know, that that's not the case," Zinner said, referencing Schneiderman's complaint. "Here's the evidence that you're violating the national mortgage servicing settlement, and you're harming communities."

Joseph Sant, staff attorney for Staten Island Legal Services, said he and his colleagues have noticed an uptick of principal reductions but noted that they were mostly on second liens.

"There weren't really home-saving modifications," he said. "As far as the servicing procedures go, we didn't' see much change."

Though Wells Fargo and Bank of America were the only two banks to be singled out, Schneiderman said that there might be grounds to eventually pursue other banks. Ally Financial, JPMorgan Chase (JPM) and Citigroup (NYSE:C) are other servicers that signed on to the national settlement.

"Let's proceed with this example of truly bad actors, and we'll take it from there," he said.

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