PHOENIX (Legal Newsline) - Arizona Attorney General Terry Goddard and Nevada Attorney General Catherine Cortez Masto have filed lawsuits against Bank of America Corporation.
Bank of America and its affiliated companies allegedly made "false assurances" about modifying mortgages and giving "inaccurate and deceptive reasons" for rejecting loan modification requests.
The attorneys general, in separate statements Friday, said their lawsuits were triggered by hundreds of consumer complaints and follow an extensive investigation into the company's residential mortgage servicing practices, particularly its loan modification and foreclosure practices.
Goddard's lawsuit, filed in Maricopa County Superior Court, alleges violations of Arizona's Consumer Fraud Act and violations of the consent judgment entered in March 2009 between Arizona and the Countrywide companies owned by Bank of America.
"Bank of America has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis. It has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole," Goddard said in a statement.
His complaint asks the court to hold the defendants in contempt for violating the consent judgment and to order them to pay restitution to eligible consumers and civil penalties, attorneys' fees, and costs of investigation to the state.
It further asks the court to order the defendants to pay up to $25,000 for each violation of the consent judgment and up to $10,000 for each violation of the state's Consumer Fraud Act.
The consent judgment was entered into on March 13, 2009, to resolve the attorney general's allegations that Countrywide had engaged in widespread consumer fraud in originating and marketing mortgage loans.
In the judgment, Countrywide agreed to develop and implement a loan modification program for certain former Countrywide borrowers in Arizona. Bank of America acquired Countrywide on July 1, 2008 and has assumed responsibility for Countrywide's compliance with the consent judgment.
Goddard's complaint alleges that since the consent judgment was entered, Bank of America has repeatedly violated the judgment's provisions related to loan modifications.
Instead of providing the relief to which eligible homeowners were entitled, Bank of America has failed to make timely decisions on modification requests and proceeded with foreclosures while modification requests were pending in violation of the agreement, Goddard claims.
Many Arizona homeowners, he explained, were led to deplete their already dwindling savings to obtain the promised relief and save their homes. Many who tried to obtain a modification ended up owing more principal on their loans or having less equity in their homes, Goddard says.
Others, he said, gave up their chances to pursue other financial options, such as short sales, while trying to modify their loans with the company.
The attorney general said Arizona has been particularly hard hit by the foreclosure crisis, as evidenced by recent reports ranking the state second behind Nevada in foreclosures.
"I am filing this lawsuit today because, after years of delay and broken promises, Arizonans should not have to wait any longer to seek redress," Goddard said. "Our homeowners and communities need and deserve relief. Bank of America must be held accountable for its deceptive conduct and failed commitments."
Meanwhile, Masto's suit, filed in the Eighth Judicial District of the state of Nevada, alleges the company engaged in deceptive trade practices by:
- Misleading consumers by promising to act upon requests for mortgage modifications within a specific period of time;
- Misleading consumers with false assurances that their homes would not be foreclosed while their requests for modifications were pending, but sending foreclosure notices, scheduling auction dates, and even selling consumers' homes while they waited for decisions;
- Misrepresenting to consumers that they must be in default on their mortgages to be eligible for modifications when, in fact, current borrowers are eligible for assistance; and
- Making false promises to consumers that their modifications would be made permanent if they successfully completed trial modification periods, but then failing to convert these modifications.
Former employees, Masto said, describe an environment in which Bank of America failed to staff its modification functions with employees who had the necessary training, skills and experience. According to the employees, the modification process was "chaotic," understaffed and not oriented to customers.
Employees, she said, were even reprimanded for spending too much time with individual consumers.
And because of Bank of America's false promises, many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds or their children's education funds, Masto said.
"We are holding Bank of America accountable for misleading and deceiving consumers. Nevadans who were trying desperately to save their homes were unable to get truthful information in order to make critical life decisions," the attorney general said in a statement.
"Consumers turn to their banking or lending institutions for answers when faced with a life changing decision such as saving their home. Bank of America's callous disregard for providing timely, correct information to people in their time of need is truly egregious."
From Legal Newsline: Reach Jessica Karmasek by e-mail at firstname.lastname@example.org.