New York claims more proof of bank mortgage abuses

NEW YORK Fri May 24, 2013 7:56pm EDT

The logo for Wells Fargo bank is pictured in downtown Los Angeles, California July 17, 2012. REUTERS/Fred Prouser

The logo for Wells Fargo bank is pictured in downtown Los Angeles, California July 17, 2012.

Credit: Reuters/Fred Prouser

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NEW YORK (Reuters) - New York Attorney General Eric Schneiderman said there is mounting evidence that Bank of America Corp (BAC.N), Wells Fargo and Co (WFC.N) and other banks violated the terms of a settlement designed to end mortgage servicing abuses.

Schneiderman - who has said he plans to sue Bank of America and Wells Fargo for failing to live up to their obligations under the deal - said other states had found similar problems.

"Several other states have identified similar recurring deficiencies by the participating servicers," Schneiderman said in a letter dated May 23 to the monitor for the settlement, former North Carolina Banking Commissioner Joseph Smith. The letter was obtained by Reuters on Friday.

The $25 billion settlement was brokered last year between five banks and 49 state attorneys general. The other banks are JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), and Ally Financial Inc GKM.N. The banks agreed to provide relief to homeowners and comply with a set of servicing standards to atone for foreclosure misconduct.

In his letter, Schneiderman did not identify which other states had provided evidence of banks failing to abide by the settlement. Nor did he identify the banks with recurring deficiencies.

He said receipt of his letter to Smith and a concurrent one to a monitoring committee would start the clock on a waiting period before lawsuits could be filed against the banks. The settlement authorizes the monitor to first work with a mortgage servicer to correct any potential violations and sue if the servicer does not fix the errors.

Schneiderman said on May 6 he planned to sue Bank of America and Wells Fargo after the waiting period was over, although he did not mention the possibility of a lawsuit in Thursday's letter.

At the time, Schneiderman said that, since last October, his office had documented 339 violations of standards - 210 by Wells Fargo and 129 by Bank of America - dictating the timeline for banks to process mortgage modification applications.

In Thursday's letter, Schneiderman said the violations reveal the two banks "are engaging in much of the same misconduct that precipitated the National Mortgage Settlement."

Smith said in a statement Friday he would review the violations Schneiderman shared. He also said he will issue a report on the banks' compliance in June. "I intend to use the full breadth of my power under the settlement to hold the banks accountable," he said.

North Carolina Attorney General Roy Cooper, who is on the monitoring committee, said in a conference call on Tuesday that some banks have "fallen short" of complying with servicing standards. He did not name any banks.

In Thursday's letter, Schneiderman said there had been "inordinate delays" in reviewing loan modification applications at Wells Fargo, so applicants had to resubmit documents.

He cited evidence of piecemeal requests for additional documents in one modification application at Bank of America, and said more than three months passed without a request for more information or a decision on another application.

Bank of America has said it did not commit any violations, and that it has provided more relief under the settlement than any other servicer. Wells Fargo has said it was committed to abiding by the settlement.

Citibank said on Friday it remains committed to fulfilling the terms of the settlement. JPMorgan spokesman Tom Kelly declined to comment. Ally said its bankrupt mortgage subsidiary Residential Capital is responsible for the settlement. A spokesperson for ResCap could not immediately be reached for comment.

On Tuesday, Smith reported that the five banks in the settlement had distributed $50 billion in direct relief to over 620,000 homeowners as part of the settlement.

(Editing by Andrew Hay and Chris Reese)

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Comments (13)
Burns0011 wrote:
Of course the banks ignored the settlement terms and kept on not doing what they were supposed to do to provide aid and relief to their customers.

Legal settlements and fines for failing to comply are not as important as increasing profits to benefit shareholders.

The only way that these big banks will comply is if they are forcibly broken up into investment banks and depository banks; only investment banks can make investments, and only depository banks can make loans, and NEITHER can sell mortgage securities on a secondary market.

May 24, 2013 1:38pm EDT  --  Report as abuse
USAPragmatist wrote:
Make an example of one or two executives and throw them in jail for 5-10 years, that will show them.

May 24, 2013 2:21pm EDT  --  Report as abuse
ptiffany wrote:
Obviously, the answer is to give these too-big-to-fail “banks” more taxpayer funds as the Federal Reserve has been doing for years. “Come and get your free money!”

May 24, 2013 2:26pm EDT  --  Report as abuse
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