The states of Arizona and Nevada sued Bank of America Corp on Friday, accusing the largest U.S. bank of routinely misleading consumers about home loan modifications.
The two lawsuits, filed by each state attorney general in Arizona and Nevada state courts, seek potentially massive fines against the bank and compensation for customers.
Arizona accuses Bank of America of violating a 2009 consent judgment in which it committed to widespread home loan modifications. The bank failed to follow through, leaving borrowers in limbo, according to the suit.
The bank is also accused of violating the state’s consumer fraud act.
Arizona is seeking $25,000 per violation of the consent decree, and up to $10,000 for consumer fraud breaches. Both states also ask that Bank of America pay restitution to customers.
The lawsuits could complicate Bank of America’s efforts to quickly resolve inquiries into its mortgage foreclosure practices. The probes include a 50-state investigation that is also looking at JPMorgan Chase & Co, Ally Financial and other major mortgage servicers.
Last month Bank of America Chief Executive Brian Moynihan said a quick settlement of the 50-state probe would be the best solution for all involved.
Arizona Attorney General Terry Goddard, who is on the executive committee of the 50-state investigation, recently lost a run for governor in Arizona.
Nevada Attorney General Catherine Cortez Masto won reelection this past November.
“This was an opportunity for the two states which have felt the biggest impact of the foreclosure crisis to stand up and say, ‘This has got to stop,'” Goddard said in a phone interview.
Bank of America Home Loans spokesman Dan Frahm said the company is disappointed Goddard filed the suit during his last days as attorney general, and that the bank would continue to work with the multi-state process.
“That is the approach that will best broaden programs for homeowners who need assistance,” Frahm said in an email.
Iowa Attorney General Tom Miller, who heads the multi-state probe, said the legal activity “neither changes, nor dilutes, the strong and resolute multi-state effort to address serious problems that have been identified with a number of mortgage servicers.”
Mortgage servicers have come under fire in recent months for abuses of the foreclosure process. In another foreclosure probe, the U.S. Securities and Exchange Commission sent out a fresh round of subpoenas last week to big banks including Bank of America.
Bank of America temporarily halted home repossessions in October as it reviewed its internal processes.
James Tierney, director of the National State Attorneys General Program at Columbia Law School, said it would be difficult for incoming Arizona AG Tom Horne to simply withdraw the lawsuit when he takes office.
But if Bank of America cuts a deal with the multi-state investigation, Horne could decide to endorse it and argue against continued litigation.
“That’s perfectly fine,” Tierney said. “That’s what AGs do.”
According to Goddard, Bank of America representatives contacted Horne in a bid to head off a lawsuit. Goddard called the outreach “highly inappropriate,” and said Horne took the same position.
Frahm said he was not aware of those interactions, and Horne did not respond to requests for comment.
In 2009 Bank of America agreed to a consent judgment over home loans made by its Countrywide unit. The bank committed to loan modifications which it valued at roughly $8.4 billion nationally, the Arizona lawsuit says.
The company violated the judgment by failing to make decisions on loan modifications, according to the suit.
Bank of America also misled consumers by telling them that their modifications were declined because investors in mortgage-backed securities had not approved them, even though in some cases no such permission was necessary, the lawsuit says.
Bank of America shares closed up 5 cents at $12.57 on the New York Stock Exchange.
The case in Superior Court of the State of Arizona, County of Maricopa is State of Arizona v. Countrywide Financial Corporation et al, 2010-033580.
The case in District Court for Clark County, Nevada is State of Nevada v. Bank of America Corp. et al, 10-631557.
Copyright © 2010 Reuters
1 thought on “Bank of America sued over mortgage abuses”
In the olden days banks were somewhat of an honorable and necessary enterprise. Seemingly in the past ten years or so since Glass Steagall was cast aside with Gramm-Leach-Bliley becoming the order of the day, they’ve turned into unethical pirates.
Too bad in addition to whatever civil penalties are levied that whole corporate boards and CEO’s of these sorry institutions can’t be rounded up, prosecuted and sent to the slammer for 20 years to life. : |
Carl Nemo **==
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