The National Mortgage Settlement: Abuses to be Revisited and Re-litigated?

Wall of foreclosure notices in Mich. Image Credit: Wikimedia Commons

One year after helping to negotiate the landmark $25 billion settlement for struggling homeowners affected by the illegal foreclosure practices of five major lenders, New York Attorney General Eric Schneiderman announced plans to sue Bank of America and Wells Fargo for failure to comply with terms of the agreement. In recent months, Schneiderman's office has compiled more than 300 allegations of these institutions' violations of key settlement provisions, including failure to process homeowner requests for lower loan payments in a timely manner and refusing to allow homeowners to submit missing documents to stave off foreclosure. The settlement, which was a response from prosecutors in a variety of states to fraudulent mortgage investments by lenders, included the possibility of future litigation if banks did not comply. AG Schneiderman sent a letter to Joe Smith, head of the committee that was assigned to monitor the National Mortgage Settlement, in which he stated his plans to sue the lenders if the banks' practices are not addressed and fixed at the committee's urging. While it is not currently clear if other prosecutors will join Schneiderman, state prosecutors in California and Iowa worked with the New York Attorney General on the initial settlement and may also file suit in response to allegations received by their states' consumer protection divisions. More information about the lenders' broader compliance with the National Mortgage Settlement when the oversight committee releases its independent report about the status and effects of the settlement next month.