In January of 2011, President Obama selected New York Attorney General Eric Schneiderman in his State of the Union address to lead a banking crime busters force. The creation of the team came on behalf of the Democrat’s disenfranchised liberal base, a sect frustrated with the lack of criminal consequences for the recession’s architects. But, given that Wall Street, the epicenter of the 2008 financial storm, lies in Schneiderman’s backyard justified the choice for him as its leader.
Since then, he’s been on a serious streak with his legal weaponry; he’s brought lawsuits against J.P. Morgan-Chase, he’s gone after Credit Suisse for conning investors before the crisis and he’s served subpoenas to the private equity firms of Romney lore. And yesterday, he continued that roll with news of Manhattan courts’ next target: a lawsuit issued at Bank of America and Wells Fargo for circumventing a National Mortgage Settlement from last year.
It’s the first time an Attorney General has brought a lawsuit under the settlement and it looks like it could be the largest action taken thus far by the Wall Street inspector.
As we’ve all heard by now, the Great Bubble of 2008 was inflated in large part by widespread mortgage default. Buyers with insufficient income to buy a home were promised low interest rates and easy payment by the too-big-to-fails, entering a subprime mortgage plot of credit default swaps that blew a massive hole into the stomach of the modern American economy. The blame has shifted between the homeowners, for not realizing they didn’t have enough money to buy a home, and the banks, for not ignoring this fact in pursuit of huge profits. But, nonetheless, one truth remains evident: those mortgage contracts were made to deceive.
So, in 2012, 48 states came together to pass what was known as the National Mortgage Settlement, which tied five of America’s most prominent banks – GMAC, Wells Fargo, Citigroup, Bank of America and JP Morgan Chase – to some sort of ethical yet enforceable code for guaranteeing mortgages. This included alternate routes for homeowners seeking relief from foreclosure and 308 “Servicing Standards” for banks to follow. Based off consumer-submitted complaints, Schneiderman counts 339 violations from both Wells Fargo and Bank of America towards New York State homeowners in this most recent lawsuit. He focuses on the corporations’ inability to efficiently process loan modifications for homeowners.
So, basically, he’s suing them for shrugging off everything the settlement stood for. “Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure,” AG Schneiderman said in a press release. “I intend to use every tool available to my office to hold these companies accountable under the terms of the National Mortgage Settlement.”
In order to bring the banks to court, Schneiderman has to notify the settlement’s Committee and allow its members 21 days to decide whether or not to proceed with the court action. But, in response to Voice inquiries, spokespersons from Wells Fargo and Bank of America both argued that the AG is opting to sue instead of resolving it in a civil manner while disregarding the honorable efforts made by the banks on behalf of homeowners.
“Wells Fargo is committed to full compliance with the National Mortgage Settlement and its associated standards. It is unfortunate that the New York Attorney General has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process,” one of the bank’s PR representatives told the Voice. “We fully support the rules established under the Settlement and we will continue to provide transparency into the progress we are making to provide relief to consumers.”
“Wells Fargo has helped more than 70,000 homeowners across the country through National Mortgage Settlement Programs and we will continue to do everything we can to help all borrowers, including the New York families described today.”
And the media relations team at Bank of America followed suit. “Through March we have provided relief for more than 10,000 New York homeowners through the National Mortgage Settlement, totaling more than $1 billion. Attorney General Schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address,” the spokesperson told us. “This agreement has been good for New York, and we continue using these beneficial programs to assist troubled homeowners in New York and nationally.”
As mentioned before, Schneiderman’s intention to sue will first have to be approved by the Committee before advancing to its next steps in court. But, if correctly counted, 339 violations is a lot to defend yourself against.
This article from the Village Voice Archive was posted on May 7, 2013