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Nevada AG sues Bank of America for home loan, foreclosure practices

Lawsuit says Bank of America misled and deceived consumers

Updated Friday, Dec. 17, 2010 | 3:42 p.m.

Click to enlarge photo

Catherine Cortez Masto

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."

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  1. The old doc shift and "stuffing" sign this and then take the doc and shove it in the folder.

  2. Well it's about time! BofA is the absolute worst bank there is. Every state should investigate them from their purchase of Countrywide to their purchase of Merrill-Lynch.
    They should be shut down in Nevada.

  3. "Falsely notifying consumers or credit reporting agencies that consumers are in default when they are not..."

    Although it's about time, our AG has again missed the point. It's not about misleading modifications -- BofA lacked basic holder status as it foreclosed on thousands of homes.

    "If you're going to take my house away from me, you better own the note." -- Joe Lents (who hasn't made a payment on his $1.5 million mortgage since 2002) in Bloomberg's 2/22/08 "Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish"

  4. This lawsuit is a wonderful use of Nevada's very good consumer protection law. It is a law which, by and large, only allow the Attorney General to use in prosecution of harsh practices which might not rise to the level of "breaches of contract" which ordinary consumers can pursue.

    The article's inventory of lender and loan servicer practices which we hear about time and time again, but which individual consumers are unable to pursue because of the overwhelming litigation power of large banks.

    Congratulations to AG Cortez Masto and staff for bringing this case. I can only hope that she will use her authority to seek injunctive relief, and that she will pursue the claims to an actual remedy which meaningfully punishes the corporations opposed to a meaningless settlement like we so often see in consumer cases.

  5. The constables and metro etc. should no longer cooperate with foreclosures and evictions involving BA especially.

    That't they really "own the loan" this does not go far enough....Eric Holder should man up too.

  6. "How do you find out, who the "owner" of your note is?"

    retiredyoungster -- look at your copy, you really don't have to go any further than "1. Borrower's Promise to Pay." Then look up NRS 104.3501. Be sure to send your demand by certified mail, with the green card. Just to be sure.

    "...I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." -- Thomas Jefferson in his May 28, 1816, letter to John Taylor

  7. thinbar -- you made the same mistake so many others do, assuming the entities demanding you pay them actually own your loan. Most foreclosers don't and worse, don't actually know who does. So starting a loan mod is actually step 3 or 4, step 1 being forcing the would-be forecloser to prove they have lawful authority (it's called "standing") to foreclose. As I mentioned above, you'll find the key to that in NRS 104.3501.

    Get in touch 1) with the state Bar to muscle the attorneys for the refund -- they must carry malpractice insurance or a liability bond, and 2) contact the AG's mortgage fraud department and get involved in the suit.

    In the meantime, file bankruptcy if your home is on the auction block soon! The local banko judges are getting wise to these forcloser games.

    Best wishes saving your home.

  8. My house loan is through Bank of America (Formerly Countrywide). I get my statement every month, I make the payment on time. B of A has been a good lender to deal with (decent rate, clear statements, etc.)
    As long as you MAKE THE PAYMENTS, you will not be foreclosed. If you fail to pay, you are in default.
    One more thing, I bought a house WITHIN MY MEANS to pay.
    If you signed the loan documents, you OWE the money.