D.C. District Court Denies New York AG’s Motion to Enforce $25B Mortgage Settlement Against Wells Fargo

by James Berg on February 17, 2015

in Banking & Finance

D.C. District Court Denies New York AG’s Motion to Enforce $25B Mortgage Settlement Against Wells FargoCalling the New York Attorney General’s motion to enforce the terms of a $25 billion mortgage settlement with five banks “penny-ante enforcement actions,” a U.S. District Court for the District of Columbia Judge denied the Attorney General’s motion finding that noncompliance allegations were insubstantial.

The $25 billion settlement agreement was reached in February 2012 and required the banks — Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo — to implement new mortgage servicing standards.

In the February 2, 2015 ruling in U.S. et al. v. Bank of America Corp. et al., (Case No. 1:12-cv-00361, in the U.S. District Court for the District of Columbia), U.S. District Court Judge Rosemary M. Collyer denied a motion by New York Attorney General Eric Schneiderman to compel enforcement against Wells Fargo. Schneiderman had alleged that the bank was subjecting homeowners to delays and obstructions for loan modifications and petitioned the court to enforce the settlement’s timelines for loan modifications.

In contesting the allegations, Wells Fargo argued that the examples provided by Schneiderman constituted less than 0.025 percent of the loans that the bank services in New York, affecting only 97 out of approximately 450,000 mortgage loans.

A joint memorandum from Bank of America, Citigroup and JP Morgan Chase requested by Judge Collyer argued that the terms of the settlement’s enforcement were clear and that enforcement authority was only granted to a federal monitor.

In denying the New York Attorney General’s motion, Judge Collyer wrote, “[t]o permit [the] NYAG to enforce failures to comply with the Servicing Standards that are so insubstantial would open the floodgates to lawsuits, running afoul of the core purpose of the Consent Judgment––to resolve problems in the mortgage industry with monitoring and compliance and without litigation. No Party, and certainly not this Court, envisioned penny-ante enforcement actions regarding compliance with the Consent Judgment.”

PIB Law represents national banks, retailers, reinsurers, insurers, mortgage lenders and financial services companies from its offices in New Jersey, New York City, Boston, Chicago, San Antonio and Philadelphia. For more information, contact PIB Law at 908-725-9700.

Previous post:

Next post: