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Published Oct. 14, 2013

Attorney generals in Florida and New York are taking dramatically different approaches toward two giant banks that have reneged on their promises to provide mortgage relief to homeowners. Florida's Pam Bondi opted for a broad new agreement with Bank of America and Wells Fargo. New York's Eric Schneiderman demanded specific action from both banks, and when Wells Fargo refused he sued. Time will tell which approach will succeed.

Bondi and Schneiderman are following up on last year's $25 billion settlement among five major banks, the federal government and 49 states over the rampant use of shortcuts to foreclose on homeowners that included "robo-signing" and falsifying court documents. Wells Fargo and Bank of America signed the agreement but have not fully followed through on establishing procedures for loan modifications for homeowners. Bondi's office has received hundreds of complaints, as have New York and other states.

Bondi, who is on the settlement's monitoring committee, recently announced a new understanding with both banks to end the runaround for homeowners. It reiterates many of the requirements of the original settlement. Borrowers must have an appropriately trained contact at the bank and their loan modification handled in a timely way.

Under the deal, banks must add personnel for better customer service and to make sure foreclosure attorneys are fully aware of each borrower's case history. This should prevent dual-tracking, where bank attorneys move a foreclosure forward while a modification is being processed. That has remained a serious problem even though it was barred by the initial settlement.

Schneiderman also reached an agreement with Bank of America. It spells out in more detail what the banks must do to improve borrower treatment and includes intensive oversight by his office. He brought an enforcement action against Wells Fargo after it refused to sign.

Bondi argues that her approach will bring financial assistance to homeowners more quickly and that a lawsuit is always an option later. But the banks have had a year to comply with the initial servicing standards and have failed. Schneiderman's hardball tactics might be a reasonable response to the bad faith the banks have exhibited. Within the next few months it should be clear which approach is the right one.