New York's top prosecutor has decided to sue
The lawsuit follows months of fruitless negotiations between New York Atty. Gen. Eric Schneiderman and Wells Fargo, according to several people briefed on the decision. Schneiderman has threatened since May to file a lawsuit against the San Francisco bank, which is the largest mortgage lender and servicer.
In a separate action also planned for Wednesday, the monitor for the national mortgage settlement was to impose four new testing standards designed to address complaints about the handling of customers. The standards were hashed out by the monitor, Joseph A. Smith Jr., and a committee made up of representatives from 11 state attorneys general, including California Atty. Gen. Kamala D. Harris.
The chief new test is designed to force the banks to do a better job of telling borrowers exactly what information was needed for them to complete their application for a loan modification, said UC Irvine law professor Katherine Porter, who is Harris' official monitor for the settlement.
Other new rules aim to provide borrowers with clearer explanations of denied modifications; to improve communication between borrowers and the "single point of contact" bank employees assigned to help them get modifications; and to improve billing accuracy, Smith said.
The Schneiderman settlement with Bank of America was said to parallel those revisions and to impose some new twists, including a requirement that the Charlotte, N.C., bank assign employees to work one-on-one with housing counselors representing troubled borrowers.
Although the Schneiderman agreement is binding only in New York, Bank of America said it would apply its provisions to the handling of troubled borrowers across the country.
"We're pleased to resolve without litigation the matters brought forward by the New York attorney general related to loan modifications," BofA said in a statement late Tuesday.
"Together with the broader work of the National Mortgage Settlement Monitoring Committee, these enhancements will continue to improve the experience for our eligible customers and groups working on their behalf, including housing counselors."
Wells Fargo said that over the last four years it has completed more than 26,000 loan modifications for borrowers in New York — six modifications for every foreclosure sale in the state.
"It is very disappointing that the New York attorney general continues to pursue his course, given our commitment to the terms of the national mortgage settlement and ongoing engagement," Wells Fargo said in a statement.
"We believe that a collaborative approach — not protracted litigation or continued threats — offers the best path toward continuing to improve services to borrowers."