New York to sue major banks over mortgage settlement

Updated
New York Attorney General Eric Schneiderman speaks during a news conference at the Justice Department on January 27, 2012, in Washington, DC. Attorney...
New York Attorney General Eric Schneiderman speaks during a news conference at the Justice Department on January 27, 2012, in Washington, DC. Attorney...
Mark Wilson/Getty Images

UPDATED 4:15 p.m.

The state of New York will sue Bank of America and Wells Fargo for allegedly violating the terms of a massive settlement between five major banks and 49 state attorneys general.

New York’s Attorney General Eric Schneiderman made the announcement Monday.

“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” Schneiderman said in a statement. “I intend to use every tool available to my office to hold these companies accountable under the terms of the National Mortgage Settlement.”

The state accuses the two banks of violating the terms of the National Mortgage Settlement, a $26-billion deal that provided aid for struggling homeowners in the aftermath of the housing market collapse. When the deal was first inked in February 2012, it was expected to help about one million homeowners reduce their mortgage debt, while hundreds of thousands more who lost their homes would receive checks for roughly $2,000.

Schneiderman alleges that Wells Fargo and Bank of America violated the settlement’s Servicing Standards, rules intended to make it easier for homeowners to seek loan modifications, on no fewer than 339 separate occasions. A letter [PDF] from Schneiderman to the other state attorneys general on the settlement’s Monitoring Committee, says these 339 violations are “merely a sample of what is potentially a much larger pattern of non-compliance.”

The settlement mandated that the servicing banks rule on a loan modification within 30 days of receiving an application and that they don’t “dual track,” or negotiate a loan modification while simultaneously working towards a foreclosure.

“Wells Fargo is committed to full compliance with the National Mortgage Settlement and its associated standards,” said a Wells Fargo spokesperson in a statement. “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. We fully support the rules established under the Settlement and we will continue to provide transparency into the progress we are making to provide relief to consumers.”

Bank of America assumed a more conciliatory position.

“Attorney General Schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address,” said a bank spokesperson in a statement. “This agreement has been good for New York, and we continue using these beneficial programs to assist troubled homeowners in New York and nationally. ”

Tune in to msnbc’s All In with Chris Hayes Monday at 8 p.m. EST to see an exclusive interview with Attorney General Eric Schneiderman.

New York to sue major banks over mortgage settlement

Updated