Wells Fargo & Co. (WFC) risks violating a national foreclosure settlement by suspending reviews of New York homeowners’ loan-modification requests following Hurricane Sandy, the state’s attorney general warned.
Delaying the reviews in the aftermath of the storm will probably result in “multiple violations” of the settlement that Wells Fargo and four other lenders reached with states and the federal government this year, New York Attorney General Eric Schneiderman said.
“My office expects Wells Fargo’s full cooperation in ensuring that no additional and unwarranted damage is inflicted on those who were victims of this tragic event,” Schneiderman said in a letter today to John Stumpf, chairman and chief executive officer of the bank.
The settlement reached with Wells Fargo, Bank of America Corp., JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Ally Financial Inc. (ALLY) sets requirements for servicing mortgages and provides mortgage relief to homeowners across the country.
Wells Fargo this month told a federal judge that a false claims case filed by the U.S. against the bank violates the settlement, which provided liability releases to the lenders. The U.S. sued Wells Fargo in October, claiming it made reckless mortgage loans that caused losses for a federal insurance program when they defaulted.
After Sandy made landfall, Wells Fargo began suspending all foreclosure sales and evictions in places designated as disaster areas by the Federal Emergency Management Agency, said Vickee Adams, a spokeswoman for the San Francisco-based lender.
The suspensions of “any foreclosure activity” will last at least 90 days for the loans Wells Fargo both owns and services, Adams said. The bank is still processing loan- modification requests made before the storm hit, she said.
Under the national settlement and New York law, Wells Fargo is required to make a decision about a homeowner’s request for a loan modification within 30 days of receiving a completed application, Schneiderman said. Wells Fargo isn’t excused from its obligations as a result of the storm, he said.
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