New York has announced plans to sue Bank of America and Wells Fargo over their failure to comply with the National Mortgage Settlement. This is a $25 billion dollar settlement involving five major banks over wrongful foreclosure practices. This lawsuit will be the first legal action over non-compliance with this settlement.
Relief put in place to help homeowners includes refinancing and principal balance reduction. More importantly, the Settlement was designed to implement a standard for handling loan modifications. The standard was violated by not acknowledging modification applications within a specified time frame, failing to notify borrowers of missing documents or errors, not giving borrowers 30 days to correct their applications and failing to make decisions on modifications within 30 days.
Violating modification procedures has resulted in borrowers losing their homes to foreclosure. Hopefully, more states will follow and will file lawsuits. California is one of the states “hardest hit” and many homeowners in this state have been affected.