Wells Fargo, Bank Of America To Be Named In Lawsuit Over New York Mortgage Practices

New York Attorney General Eric Schneiderman released a statement Monday saying that he plans to sue Bank of America Corp. (NYSE: BAC) and Wells Fargo and Co. (NYSE: WFC) for violating the National Mortgage Settlement set up last year.

Signed in 2012, the National Mortgage Settlement required the five largest mortgage servicing banks in the United States to improve their customer service practices by complying with new mortgage servicing rules, known as the servicing standards. Among these are four standards dictating the timeline for banks to process mortgage modification applications.

According to the statement, Schneiderman’s office has documented 339 violations of those standards by Wells Fargo and Bank of America since October 2012.

“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure," the attorney general said in a statement.

Schneiderman was among 49 state attorney generals who brokered a $25 billion settlement between the five largest mortgage servicers last year that was intended to curb abusive foreclosure practices and was expected to help roughly 1 million borrowers. Schneiderman said he sent a letter to monitors for the National Mortgage Settlement informing them of his intent to sue the banks. He said he would seek injunctive relief and an order requiring the banks to comply with the settlement.

In addition, Schneiderman said his action would be the first law enforcement claim under the settlement. He said the agreement allows any party to bring action following a 21-day notice to the monitoring committee set up to enforce the agreement.

During the 21-day period, he said, the committee may choose to pursue the litigation under its own authority or may defer action. If the committee defers, he said, he is allowed to pursue the claim on his own after another 21 days.

JPMorgan Chase & Co (NYSE: JPM), Citigroup Inc (NYSE: C) and Ally Financial Inc were the other banks in the National Mortgage Settlement.