Arizona and Nevada sue Bank of America over loan modifications
Echoing recurring complaints about mortgage lenders, authorities in Arizona and Nevada have filed civil fraud lawsuits accusing Bank of America Corp. of misleading troubled borrowers into expecting loan modifications that never came.
The desert states, among the hardest hit by foreclosures, are also part of a 50-state coalition that is negotiating with major banks over a host of foreclosure-related complaints.
But while that joint effort began only recently under the leadership of Iowa Atty. Gen. Tom Miller, Nevada and Arizona officials said Friday that they had been investigating a flood of loan modification complaints concerning Bank of America for a year and a half.
BofA, which provides customer service on more loans than any other lender, “has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis,” Arizona Atty. Gen. Terry Goddard said.
“It has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole,” he said.
In addition to fraud allegations, Goddard’s lawsuit accuses the Charlotte, N.C., bank of failing to implement anti-foreclosure measures it had promised in March 2009 as part of a settlement involving its Countrywide Financial Corp. unit., which it acquired in 2008. Officials in Arizona, as in California and other states, had accused Calabasas-based Countrywide of defrauding consumers by deceptive marketing of subprime and pay-option loans.
Bank of America called the lawsuits, filed in state courts, regrettable. It recently announced its own initiatives to improve servicing of troubled loans, including assigning 2,500 loan-origination employees to help with modification efforts.
The bank said problems in Nevada and Arizona would be best addressed through those efforts and through the negotiations with the Miller-led coalition of 50 states.
Loan modifications that lower payments are supposed to keep borrowers in their homes, cost banks and loan investors less than foreclosures would and reduce the number of vacant properties in neighborhoods.
But with the foreclosure crisis in its third year, troubled borrowers increasingly have accused banks of acting in bad faith by promising them permanent modifications that are never delivered.
In an interview, Goddard said many distressed Countrywide borrowers in Arizona had been left in limbo as BofA failed to make timely decisions on their status, leaving them financially worse off when permanent modifications are denied after many months.
Goddard said Bank of America failed to provide justifications for denials of modifications, misled borrowers into thinking they had to miss payments to obtain modifications and initiated foreclosure proceedings while trial loan modifications were in place — all in violation of its settlement with the state last year.
The latest suit, filed in Maricopa County Superior Court, seeks up to $25,000 for each violation of the consent judgment and up to $10,000 for each violation of the Arizona Consumer Fraud Act.
The suit filed Friday by Nevada Atty. Gen. Catherine Cortez Masto seeks damages on behalf of borrowers that it said were forced to wait six months or a year for loan modification decisions that should have been made in one to three months.
It quoted BofA employees accusing the bank of understaffing the loan modification effort and using undertrained workers, creating a “chaotic” process for borrowers. The bank reprimanded employees for spending more than 10 minutes at a time helping any borrower, the suit said.