All In   |  May 06, 2013

Banks sued for flagrant violations

New York State Attorney General Eric Schneiderman joins Chris Hayes in an exclusive interview about why, after a multibillion dollar settlement, banks are still not living up to rules about mortgages and refinancing.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> this enforcement action, which is the first taken under the settlement, is based on 339 individual complaints from new yorkers against these two banks in just the last six months.

>> any day when you have any public figure actually trying to do something to hold banks accountable is a shocking welcome and rare day. it is big news today to hear new york attorney general eric snyderman announcing he'll be filing a lawsuit in federal court against wells fargo and bank of america for repeated violations of the massive 49- state bank settlement. we have told you a lot about the systematic abuses by banks including home owners being wrongfully foreclosed upon. the practices were so widespread that 49 attorneys general joined a suit against the banks that led to a $26 billion settlement. in the grand scheme of things, that money is a cost of doing business for the banks . the settlement also set basic standards for the banks to meet to reform business practices going forward. lo and behold, these banks have flagrantly violated the agreement. according to the attorney general. anyone who has been following the banks over the last six years should not be surprised by that news. the big question is what will finally make them stop. joining me tonight in his first interview since initiating this enforcement action is eric schneiderman . great to have you here. so, the banks engage in all the practices. there is this settlement. and part of the settlement is you can't do this anymore. how did you guys come to decide they were in violation of the settlement?

>> well, the servicing settlement has -- prize for relief for homeowners, but also has 304 specific rules the banks have agreed to follow. so in new york , we invested in a network of housing counselors and legal service providers because when i took office, half of the families being foreclosed on were going through the foreclosure process without speaking to a lawyer once. we decided to change that. as a result, we got this great network out there that have been helping us collect information. there were so many violations, we created our own special form to check owhich of the servicing requirements the banks were violating. we determined pretty quickly that wells fargo and bank of america were far and away out in front of the other banks as far as violations go. there are very specific terms they have agreed and are legally obligated to follow, they have to get back to home owners within five days of a request for a modification on a mortgage, to tell them if there are deofficial says, missing documents. the homeowner has 30 days after that to fulfill the deofficial says and the bank has to make a decision in 30 days . they have been violating that. we have 220 complaints about wells. 129 about bank of america . we're taking them to court.

>> and the context of this, i've done some reporting on this and talked to folk on the other end of this, totally kafkaesque stories of sending loan documentation in 12 times, 12 different people, they lose it, sending in checks that get lost, horrible things going on which was the thing that created the settlement in first place.

>> they have new obligations. in addition to whatever work is being done by the monitor, parties to the settlement, new york is a party, have the right to enforce it. we're following the procedures. we sent notice to the monitoring committee, telling them we're going to file suit. they have 21 days to take action. if they don't, we're going into the u.s. district court in the district of columbia and we'll bring them in, seeking injunctive relief to force them to change their business practices and have the court impose penalties on each case where they failed to do so.

>> i want to just read statements from each bank, issued statements today, one of our reporters got these statements. wells fargo is committed to full compliance in the national mortgage settlement, its standards. it is unfortunate the new york attorney general has chosen this route rather than engage in a constructive dialogue for the establish dispute resolution process. we fully support the rules established on the settlement and will continue to provide transparency into the progress we're making to provide relief to consumers. bank of america , a bit different tone, attorney general schneiderman has referenced 129 customer servicing problems which we take seriously and will work quickly to address. this agreement has been good for new york and we continue using the beneficial programs to assist troubled home owners in new york and nationally. wells fargo seems to indicate you don't have the authority under the agreement to tate action that you're taking, that actually you have to go through a dispute resolution with this person who has been established under the settlement to monitor infractions. is that the case?

>> no, no. wells isn't saying that. they're suggesting we should have spoken about this and then they would have changed -- listen, our lawyers and the lawyers for our legal service providers and housing counselors are dealing with these banks every day. it is not as though we're not trying to resolve these problems. they just haven't been compliant. and they're doing a much worse job than the other banks which is not charitable institutions by any means, but they're in flagrant violation, no question that the monitor has an obligation to monitor, which is why it is called a monitor, to issue reports in the aggregate and has some powers under the settlement agreement . the parties to the agreement have the ability to go into court and there is a procedure set forth where you have to give notice and go into a particular court, designated, the federal district court in washington. we're following the procedure. no doubt we have the authority to do it. and we're taking these guys to court.

>> here is the $64,000 question for you. dave dayan reporting on this, he's been critical of -- critical of the settlement, critical of some of the stuff you've done, basically, i have a long quote, i'll sum rise, this agreement was too weak was the beginning thought and more broadly, here is the question i want to pose to you. what does it say about the settlement that they just went back to doing the same stuff? that, to me, is the big question. what is going to get them to stop? there have been numerous private lawsuits, there is a settlement with the occ. there is this settlement. it is not like they haven't been caught red handed literally thousands of times doing all sorts of crazy stuff like foreclosing on people who are current on their mortgage, right? so question is, why aren't they stopping? is this settlement is what it was cracked up to be, why are they still doing this?

>> the settlement in itself provided a lot of relief. it provides very specific terms and it was actually pretty well negotiated. the problem is the banks have overwhelming confidence that law enforcement is not taking this seriously. overwhelming confidence that whatever the rules are, won't be followed up on. i held out and refused to be participate until they carved out and created actually an unprecedented state federal working group to investigate the conduct that blew up the american economy . keep in mind, these are the same guys who issued all the mortgage-backed securities to get us into this mess in first place and lost -- we lost $7.4 trillion in home equity , that's why we're dealing with so many foreclosures. so they just don't believe that anyone in law enforcement will go after them. i am working with my colleagues. there are folks that want to go after them. i'm trying to work with all of them and to nudge along some other folks who are a little more reluctant. they're seeing action now. we filed several major lawsuits against them. the s.e.c. has filed actions. the department of justice will be following along.

>> that's the big question. doj which we have not seen anything out of --

>> i think you should expect to see something soon out of doj and the banks probably didn't expect us to file a lawsuit.

>> clearly they didn't. if they did, they probably would have stopped.

>> probably would have been a little more cooperative. it is time for accountability. the american people -- the banks don't give you a buy if you forget and lose their documents. they don't deserve anything else.

>> new york attorney general eric schneiderman , thank you for coming on.

>> thanks, chris.

>>> right back with click 3.