Published Friday, Dec. 17, 2010 | 12:45 p.m.
Updated Friday, Dec. 17, 2010 | 3:42 p.m.
The Nevada Attorney General's office sued Bank of America Friday morning for allegedly deceiving homeowners through its residential loan modification and foreclosure practices.
The lawsuit, filed in Clark County District Court and triggered by consumer complaints, named as defendants the bank's parent company as well as BAC Home Loans Servicing, LP, Recon Trust Co.
"We are holding Bank of America accountable for misleading and deceiving consumers,” Nevada Attorney General Catherine Cortez Masto said. “Nevadans who were trying desperately to save their homes were unable to get truthful information in order to make critical life decisions.”
In response, Dan Frahm, senior vice president at Bank of America Home Loans, released the following statement Friday afternoon:
“We share Attorney General Masto’s goal of helping homeowners. We are disappointed that this suit and a similar suit in Arizona were filed at this time, however, because we and other major servicers are currently engaged in multi-state discussions led by Attorney General Miller in Iowa to try to address foreclosure related issues more comprehensively. That is the approach that will best broaden programs for homeowners who need assistance. Bank of America has been a cooperative partner with the Attorneys General, and has worked with state leaders to evolve programs and resources to broaden assistance to distressed customers. We are already underway with further improvements to our processes and programs for Bank of America customers.”
The attorney general's complaint alleges that Bank of America is:
• 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;
• 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;
• Misleading consumers with inaccurate and deceptive reasons for denying their requests for modifications;
• Falsely notifying consumers or credit reporting agencies that consumers are in default when they are not;
• Misleading consumers with offers of modifications on one set of terms, but then providing them with agreements on different sets of terms, or misrepresenting that consumers have been approved for modifications.
The attorney general's office alleged that the bank made false promises that led many Nevada consumers to make mortgage payments they could not afford, running through their savings, their retirement funds or their children’s education funds. It was also alleged that consumers deferred short-sales and passed on other attempts to mitigate their losses due to the bank's "misleading assurances." Masto's office also said that consumers "waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes."
"Whatever the consumers’ particular circumstances, they all suffered the stress and frustration of being misled by Bank of America while trying to take responsible action to modify their mortgages so they could continue to make their payments and remain in their homes," the attorney general's office stated.
Masto's office said that the bank's "misconduct in misrepresenting its mortgage modification program" was confirmed in interviews with consumers, former employees and other third parties and through review of relevant documents. Her office also stated that former employees describe an environment in which the bank failed to staff its modification functions with employees who had the necessary training, skills and experience.
Bank employees also told the attorney general's office that the modification process was chaotic, understaffed and not oriented to customers. Employees also said they were reprimanded for spending too much time with individual consumers.
“Consumers turn to their banking or lending institutions for answers when faced with a life-changing decision such as saving their home,” Masto said. “Bank of America’s callous disregard for providing timely, correct information to people in their time of need is truly egregious."