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A federal judge dismissed on Monday allegations from New York's attorney general that Wells Fargo failed to live up to its end of a historic $25 billion mortgage servicing settlement struck in 2012.
In an opinion released Monday, U.S. District Judge Rosemary Collyer said Attorney General Eric Schneiderman didn't present substantial evidence that Wells Fargo—one of five major servicers that originally entered into the deal with 49 state attorneys general—neglected its servicing obligations under the terms of the settlement.
Schneiderman had specifically accused Wells of not meeting timeline requirements for loan modifications requested by struggling New York homeowners.
The allegations cover 97 of the roughly 450,000 mortgages Wells Fargo services in New York alone—or about 0.022 percent, Collyer noted in her judgment.
"Despite this small number, NYAG alleges that Wells Fargo repeatedly failed to comply with these Loan Modification Timeline Requirements, subjecting numerous New York homeowners to 'Kafkaesque delays and obstructions in the loan modification process,'" she wrote.
She goes on to remind Schneiderman that the 2012 settlement established independent monitors for all of the firms involved—and that Wells Fargo has only once had issues meeting some of the timeline requirements, a matter that was quickly resolved to the monitor's satisfaction.
"The [settlement] does not require absolute perfection in loan servicing," Collyer concluded in her judgment, adding, "To permit 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."
