New York to sue banks in mortgage settlement case

• Banks allegedly miss deadlines for acting on mortgage modification requests
• Bank of America%2C Wells Fargo accused of dozens of violations of %2425B settlement
• Settlement%27s monitor has reported more than 5%2C800 consumer complaints

New York Attorney General Eric Schneiderman said Monday he intends to sue Bank of America and Wells Fargo, saying they violated terms of last year's $25 billion mortgage settlement.

Schneiderman said his office has documented 210 violations by Wells Fargo and 129 involving BofA since October. The banks have "flagrantly violated" the settlement's standards, he said.

The settlement, reached between five large banks and 49 state attorneys general, called for billions of dollars in consumer relief and new rules aimed at protecting consumers from abusive mortgage-servicing practices.

The attorney general said he has notified the settlement's monitor and its monitoring committee of his intentions to file a lawsuit if the committee doesn't act.

The lawsuit could be filed within weeks in U.S. District Court for the District of Columbia. If so, it would be the first by a state attorney general to enforce the settlement's terms.

The banks' alleged violations relate to not meeting deadlines for processing loan modifications, including requirements to make decisions on completed applications within 30 days and to tell borrowers of missing documents within five days of getting their applications.

The allegations are similar to those directed at mortgage servicers before the settlement.

They're also not the first signs that banks might not be meeting the standards, which took effect in October.

The consumer complaints in New York and elsewhere underscore that "problems persist," says Ira Rheingold, executive director of the National Association of Consumer Advocates.

The settlement monitor, Joseph Smith, says his office received 5,818 consumer complaints about servicers through February and hundreds more that came from professionals such as lawyers.

" I continue to believe there are areas in which the banks must improve their treatment of their customers," Smith said in a statement Monday. He's expected to deliver his first big report on the banks and servicing standards in June.

Under the settlement, Smith can require banks to fix servicing problems, but only if their failures exceed an acceptable margin of error, says Mark Ladov, a lawyer with the Brennan Center for Justice at New York University.

The complaints received by Smith — and those publicized by Schneiderman — might prompt Smith to be more aggressive about speaking out than he's been so far, Ladov says.

In response to Schneiderman's allegations, Bank of America released a statement saying that it would take the customer servicing problems "seriously" and work quickly to address them.

Wells Fargo's statement restated its commitment to full compliance with the settlement's standards and added that it was "unfortunate" that Schneiderman took the course he did.

In addition to BofA and Wells Fargo, the settlement includes Citibank, JPMorgan Chase and Ally Financial/GMAC.

More of the complaints from New York homeowners concerned BofA and Wells Fargo, Schneiderman said.

If New York files a lawsuit, it may prove a model for other states.

On Monday, Florida Attorney General Pam Bondi said her office, was monitoring compliance with the standards and was in contact with several banks on behalf of complainants.