Bank of America and Wells Fargo are still being criticized for their mortgage servicing practices, more than a year and a half after a national settlement intended to force big banks to clean up their act.
Two watchdogs took separate actions Wednesday to try to eliminate issues with missing paperwork and delayed responses during mortgage modifications that have spurred thousands of complaints to federal regulators.
The New York attorney general announced Wednesday plans to file a lawsuit against Wells Fargo & Co., alleging the San Francisco bank is not living up to the terms of a $25 billion national mortgage settlement entered into with large U.S. mortgage servicers last year.
The lawsuit will claim Wells often does not respond quickly enough to customers' requests for mortgage modifications. New York Attorney General Eric Schneiderman first documented the problems in May. The suit comes after the bank failed to reach an agreement with his office to address the issues, he said.
In a Tuesday statement, Wells spokeswoman Vickee Adams said the bank is "proud of its track record of providing important relief to borrowers in New York and nationwide." She said Wells has continually made improvements to its servicing since the settlement was announced.
Bank of America Corp. struck a deal with the attorney general's office to avoid litigation. The Charlotte, N.C., bank will make high-level contacts at the
bank available for housing counselors working on behalf of distressed borrowers, among other commitments, a spokesman said Tuesday. Schneiderman said he is leaving the door open for future legal action against Bank of America if the new programs aren't effective.
These new programs could ultimately be expanded to other states.
"Both of these cases should send a strong message that the big banks must comply with the legally binding servicing standards negotiated in the national mortgage settlement, or face the consequences," Schneiderman said in a statement.
Both banks will now also be ordered to show they're giving borrowers a chance to resubmit missing documents during a mortgage modification and given a clear explanation of why they've been denied for help with their loans.
In the second development Wednesday, Bank of America, Wells Fargo and the three other banks participating in the national mortgage settlement will now face new tests to measure their performance in those areas, the monitor of the settlement and former N.C. banking commissioner Joseph Smith said Wednesday. He said the tests are designed to address what he called "persistent issues" in the mortgage servicing industry.
"I have met with attorneys general, counselors, other advocates, and distressed borrowers in 10 states over the past year," Smith said in a statement. "Time and time again, I have heard their ongoing frustrations with the loan modification process, single points of contact, and billing and account statement issues."