Arizona Attorney General Terry Goddard announced that on December 17, 2010, his Office filed a lawsuit against Bank of America and its affiliated companies alleging violations of the Arizona Consumer Fraud Act and violations of the consent judgment entered in March 2009 between Arizona and the Countrywide companies owned by Bank of America.
The lawsuit, filed in Maricopa County Superior Court, was triggered by hundreds of consumer complaints and follows a year-long investigation into Bank of America’s residential mortgage servicing practices, particularly its loan modification and foreclosure practices.
Goddard stated that Bank of America, the nation’s largest residential mortgage loan servicer, should be leading the way out of the country’s foreclosure crisis. Instead, he said, “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.”
The 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 Arizona Consumer Fraud Act.
Goddard noted that Arizona has been particularly hard hit by the foreclosure crisis, as evidenced by recent reports ranking the state second behind Nevada in foreclosures. Nevada plans to file a similar lawsuit against Bank of America today.
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.
The complaint filed today 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.
The complaint also alleges that Bank of America has violated the Consumer Fraud Act by misleading Arizona consumers about its loss mitigation process and programs, including matters such as:
• Whether homeowners must be delinquent on their mortgage payments to be considered for a loan modification.
• How much time it would take to receive a decision from Bank of America on a modification request or a short sale request.
• Whether foreclosure would proceed while a modification or short sale request was pending, or while a homeowner was making trial payments.
• Whether the homeowner had been approved for a loan modification.
• Failure to provide valid reasons why the homeowner was declined for a modification.
• Whether the homeowner would be approved for a permanent modification if the consumer successfully made all trial modification payments.
As a result of Bank of America’s deceptive practices, many homeowners who were already contending with other financial hardships have been led to unnecessarily deplete their dwindling savings in futile attempts to obtain the promised relief and save their homes. Many homeowners who tried to obtain a modification from Bank of America ended up owing more principal on their loans or having less equity (becoming more “underwater”) in their homes. Others gave up their chances to pursue other financial options, such as short sales, while trying to modify their loans with Bank of America. These consumers endured months of frustrating delays, not knowing whether or when they would lose their homes. They called Bank of America and resubmitted their paperwork over and over again in futile efforts to get the help they were promised.
“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 stated. “Our homeowners and communities need and deserve relief. Bank of America must be held accountable for its deceptive conduct and failed commitments.”
For anyone in the front lines of the foreclosure debacle, this should come as little surprise. The Attorney’s General’s lawsuit joins many across the country seeking class-action status, alleging that Bank of America regularly falsely informs borrowers that it did not receive requested information and demands that documents be re-sent. Bank of America is not exactly alone here. The entire loan modification "extend and pretend" system is flawed and implicitly intended to allow servicers of loans the opportunity to make more money while stringing people along with the false hope that they will receive a permanant loan modification.