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New York Attorney General Eric Schneiderman is revising his allegations of foreclosure settlement violations by Wells Fargo (WFC) and Bank of America (BAC), resetting the clock on his plans to sue the banks over 339 alleged servicing violations.
May 17 -
New York's Attorney General charged Bank of America and Wells Fargo with hundreds of cases of failure to comply with the national mortgage servicing settlement recently. The claims made for lots headlines but may prove a non-starter in court.
May 10 -
New York Attorney General Eric Schneiderman stands alone in announcing a lawsuit against Bank of America and Wells Fargo for violations of the $25 billion mortgage settlement. But that may soon change.
May 6
A public rift is emerging among some of the Democratic attorneys general who forged the 49-state mortgage settlement with five major banks.
The split centers on how aggressively the states should pursue alleged violations of detailed mortgage servicing standards contained in the 15-month-old agreement.
Earlier this month, New York Attorney General Eric Schneiderman announced plans to sue Bank of America (BAC) and Wells Fargo (WFC) over more than 300 instances of alleged noncompliance. But on a conference call with reporters Tuesday, Iowa Attorney General Tom Miller and North Carolina Attorney General Roy Cooper sent signals that the settlement's multi-state monitoring committee is not on board with New York's combative approach.
Cooper, a member of the settlement's monitoring committee, sounded dismissive of the idea of filing lawsuits, saying that approach will take years. He said the more effective way to ensuring compliance with the servicing standards is to follow the steps laid out in the settlement.
"We expect the banks to comply with the servicing standards, and some of them have fallen short," Cooper told reporters, though he declined to name any specific banks. "If they don't correct it, we will take action."
Miller, also a member of the monitoring committee, added that the banks' fitful progress in implementing the servicing standards was to be expected, given the dysfunctional preexisting state of the mortgage servicing business.
"Not surprisingly, there's some progress made, but there's still a lot to be done," said Miller, who played a lead role in negotiating the multi-state settlement. "It's like turning around an aircraft carrier that's out of control. It's difficult but possible."
The conciliatory tone of those remarks is significant because New York AG Schneiderman
Signs of the rift surfaced as state and federal officials were touting the settlement's benefits for U.S. consumers. Through March 31, the five banks that are part of settlement provided more than $50 billion in consumer benefits, according to a report issued Tuesday by the settlement's watchdog.
Iowa AG Miller told reporters that the $50 billion total far exceeds his office's original estimate of $36 billion in consumer benefits.
"We really didn't anticipate this. It's very welcome," he said.
Of the $50 billion total, $20 billion came in the form of short sales, according to the report by settlement monitor Joseph Smith. Principal reduction on first liens totaled $10.1 billion. (All of the numbers were based on data provided by the banks and were not independently verified.)
In addition to Bank of America and Wells Fargo, banks that have obligations under the settlement include Citigroup (NYSE: C) and JPMorgan Chase (JPM). Ally Financial also signed onto the agreement, but some of its obligations have shifted to other parties as it has unwound its mortgage portfolio.
Consumer advocates have criticized the banks for relying too heavily on short sales, and not enough on principal reduction, to meet their obligations. The new numbers show that first-lien principal reductions now account for around 20% of all consumer benefits under the settlement, up from around 14% six months earlier.
Besides providing benefits to individual homeowners, the settlement was billed as having the potential to overhaul the mortgage servicing industry. The agreement contains more than 300 servicing standards that the banks are obligated to meet.
New York's Schneiderman has alleged that B of A and Wells have "flagrantly violated" their responsibilities. In response, Bank of America questioned New York's authority to act on its own, and Wells Fargo lamented the state's decision to go outside the dispute resolution process established under the settlement.
Meanwhile, the settlement's established process for determining whether the banks are in compliance is moving forward. Smith, the settlement's monitor, said Tuesday that he plans to submit his first report on the issue to a judge next month. His office also stated that it is developing at least one new test to better measure the banks' performance in complying with the servicing standards.
The Iowa attorney general singled out Bank of America for praise, providing a sharp contrast to the words of the New York counterpart.
Charlotte-based B of A has provided $27.9 billion in consumer benefits, more than half of the total amount for the five banks. "They don't get mentioned in a positive manner too often," Miller said.
B of A also touted its efforts in a press release, stating that it has provided relief to about 320,000 customers.
The rift between Schneiderman and some of his fellow Democratic attorneys general is not a surprise. The New York AG was
In a press release Tuesday, Schneiderman hailed the consumer benefits have been delivered under the settlement, but also showed no signs of backing down with regard to the servicing standards.
"While we are pleased that the benefits to homeowners including reduced debt, lower mortgage payments, and averted foreclosures have been substantial, our work is not finished," he said. "My office will continue to monitor the banks' compliance with the settlement."
