New York to sue BofA, Wells Fargo over mortgage practices

Mon May 6, 2013 6:24pm EDT
 
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By Karen Freifeld and Aruna Viswanatha

NEW YORK (Reuters) - New York Attorney General Eric Schneiderman said on Monday he plans to sue Bank of America Corp (BAC.N: Quote) and Wells Fargo and Co (WFC.N: Quote) for violating the terms of a settlement designed to end mortgage servicing abuses.

Schneiderman issued the announcement, which suggests lawsuits could be filed against the banks within two months, ahead of a widely anticipated report from the monitor for the multi-state settlement, which is expected to be critical of banks.

The planned action is the first involving allegations that top banks, which agreed last year to provide $25 billion in relief to homeowners and comply with a set of servicing standards to atone for foreclosure misconduct, are not living up to their obligations under the deal.

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.

Schneiderman said he would seek injunctive relief and an order requiring the two banks to comply with the settlement. His statement did not say he was seeking damages or penalties.

But it is unclear how far Schneiderman can take his efforts, because they come outside the primary channel authorized by the settlement for any potential violations.

The settlement authorized the monitor to first work with a servicer to correct any potential violations and sue only if the servicer does not fix the errors.

In an afternoon news conference, Schneiderman acknowledged the authority provided to the monitor, but said he could still move forward.   Continued...

 
People walk at a Bank of America's Tower in New York October 24, 2012. REUTERS/Eduardo Munoz