Wells Fargo Said to Face Action Over Accord Compliance
By Christie Smythe & Andrew Harris – Oct 2, 2013 12:01 AM ET
Wells Fargo & Co. (WFC) will face an enforcement action today by New York state over the bank’s alleged failure to uphold terms of a $25 billion mortgage-servicing settlement, a person familiar with the matter said.
The action, in the form of a motion to compel compliance with the 2012 accord, is to be filed by New York Attorney General Eric Schneiderman in federal court in Washington, said the person, who asked not to be identified because the matter isn’t public.
Pedestrians pass in front of a Wells Fargo & Co. bank branch in New York. Photographer: Scott Eells/Bloomberg
Wells Fargo and Bank of America Corp. were accused by Schneiderman’s office of violating the national settlement, under which five of the country’s largest mortgage servicers promised to reform foreclosure and loan-modification practices.
Bank of America has agreed to changes aimed at bringing the Charlotte, North Carolina-based lender into compliance with the deal, according to the person. San Francisco-based Wells Fargo hasn’t agreed to any changes, the person said. The practices Bank of America agreed to change to bring itself in line with the settlement apply in New York only, although the bank is expected to try to expand those reforms nationwide, the person said.
In 2012, a coalition of 49 states and the U.S. reached the national settlement with Wells Fargo, Bank of America, JPMorgan Chase & Co. (JPM), Citigroup Inc. and Ally Financial Inc. (ALLY) in an effort to combat mortgage-servicing abuses such as “robosigning” of documents used in foreclosure proceedings and barriers to modifications of loans.
Matt Mittenthal, a spokesman for Schneiderman’s office, declined to comment on today’s action.
Vickee Adams, a spokeswoman for Wells Fargo, said in an e-mailed statement that “if true, 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.”
“Wells Fargo is proud of its track record of providing important relief to borrowers in New York and nationwide,” she said, describing the company as a “leader in preventing foreclosures, helping families maintain homeownership with more than 880,000 modifications nationwide and 26,000 in New York over the last four years.”
Adams said that the bank has modified six loans for every foreclosure sale in New York since the beginning of 2009. The bank has found it has been able to avoid foreclosure for 75 percent of New York borrowers who seek modifications after falling behind by one or two mortgage payments, she said.
Dan Frahm, a Bank of America spokesman, said the bank was pleased to resolve the issues raised by Schneiderman’s office without litigation.
“We’re pleased with the significant assistance Bank of America has extended, and continues to extend, to homeowners through the national mortgage settlement and we will continue working with attorneys general nationwide to continually improve the experience for customers eligible for these important programs,” Frahm said in an e-mail.
The agreement stemmed from discussions between the bank and the New York attorney general’s office over the past several months, according to Frahm.
Under terms of the national deal, the banks agreed to streamline processes for distressed mortgage borrowers seeking to modify loan terms, among making other reforms. The deal also provided monetary relief for homeowners.
Illinois Attorney General Lisa Madigan said yesterday that Bank of America and the four other companies covered by the 49-state agreement will put in place new procedures to improve the process for borrowers to seek loan modifications.
“The bank servicing standards established in the national settlement were supposed to eliminate headaches for borrowers, but homeowners continue to report problems,” Madigan said in a statement.
Yesterday’s agreement requires the lenders to give homeowners 30 more days to respond to requests for additional documents before their homes can be referred for foreclosure or sale, the attorney general said.
The banks also said they would increase their oversight of those representatives communicating with borrowers about the status of loan modification applications, she said.
Schneiderman’s office documented hundreds of violations of those standards by Wells Fargo and Bank of America since October 2012, according to a June 19 statement. The attorney general said in May that he intended to bring an enforcement action against the banks.
States that were parties to the agreement can bring their own individual enforcement actions under the deal if a national committee declines to pursue litigation. The monitoring committee opted not to bring an enforcement action against Bank of America and Wells Fargo after New York complained that they were violating the settlement, according to a letter from the panel in June.
The committee said the settlement established a process for banks to fix violations and remediate harm to borrowers and that oversight of that process would be “the most efficient path to improving services to borrowers — and, we believe, will bring about those reforms more quickly than protracted litigation.”
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