New York Attorney General Eric Schneiderman, who headed a group of state attorneys general that won homeowners and former homeowners a $26 billion settlement from five mega-banks over their foreclosure abuses, announced yesterday that he’d sue two of the banks—Wells Fargo and Bank of America—for allegedly violating the terms of the settlement.
The February 2012 settlement with those two banks, as well as JP Morgan Chase, Citibank, and Ally Financial (formerly GMAC), had required the banks to adhere to a set of standards that would end the kind of abuses that had led to wholesale foreclosures of homes when they could have worked out alternative arrangements with the homeowners. Some of those standards—such as requiring the banks to notify struggling homeowners within five days that they had received the documents required to modify mortgages—sound so obvious they shouldn’t have needed to be codified, yet it was precisely such practices that the banks had repeatedly shunned. Homeowner advocates were adamant that such standards be made part of the agreement. Many were skeptical that they would be enforced.
Yesterday, Schneiderman said that his office’s investigations had turned up 210 separate alleged violations of those standards by Wells Fargo (the nation’s largest mortgage-writer) and 129 by Bank of America. He didn't rule out filing suit against the other banks that had signed on to the settlement. “We’re going to start with these two banks,” he said, because his office’s work with community groups—a longstanding Schneiderman practice—convinced him that Wells and BofA were “the most flagrant violators” of the accord.
Schneiderman took office in January, 2011, shortly after the “robo-signing” revelations of banks’ foreclosure practices, and quickly refused to go along with a deal, promoted by the Obama administration and many other state attorneys general, that required less of the banks than the settlement that Schneiderman, California Attorney General Kamala Harris, and other progressives eventually compelled their colleagues to accept. (I profiled Schneiderman and his fight with the banks—and his fellow attorneys general—in the cover story of the May 2012 Prospect.) Schneiderman successfully insisted on the establishment of a joint federal-state task force to investigate the range of bank misconduct that led to the 2008 financial meltdown. In the year since that deal was cut, however, the task force has yet to produce any findings, which some progressive critics of the deal argue reflects the administration’s unwillingness to pursue the major banks. Others advance the theory that the combined powers of the federal and state governments aren’t sufficient to go head-to-head with the army of lawyers that America’s largest banks could field if confronted with lawsuits or criminal charges of that magnitude.
In any event, what Schneiderman signaled yesterday was that he’d go after as many alleged violations as his office could turn up by itself. It may spur other states and federal agencies to follow suit, or not. Either way, Schneiderman has made this one of his signature issues, and he shows no inclination to back off.