Arizona and Nevada are suing Bank of America over its loan modification and foreclosure practices, claiming the lender was slow to ramp up loss mitigation efforts and then misled consumers with false assurances that they wouldn’t be foreclosed on while requests for loan modifications were pending.
Bank of America "has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole," Arizona Attorney General Terry Goddard said in announcing a lawsuit alleging violations of the Arizona Consumer Fraud Act.
Arizona’s suit also claims Bank of America has violated the terms of a multibillion-dollar 2008 consent order, in which the lender settled claims by a number of state attorneys general alleging unfair and deceptive lending practices by Countrywide Financial Corp., which Bank of America acquired that year.
Nevada Attorney General Catherine Cortez Masto said her office has filed suit against Bank of America after investigating consumer complaints that the lender misled consumers seeking loan modifications on a range of issues.
Bank of America broke promises to act on requests for loan modfications within a specific time period, changed the terms of loan modifications after they were offered, and provided "innacurate and deceptive reasons" for denying loan modifications, Masto said.
In a statement, Bank of America said it was disappointed that the lawsuits were filed when it is already engaged in discussions with state attorneys general investigating "robo-signing" allegations of sloppy handling of paperwork in foreclosure proceedings.
Those discussions, led by Iowa Attorney General Tom Miller, are the "approach that will best broaden programs for homeowners who need assistance," Bank of America said.
In an interview published Dec. 12 by the Des Moines Register, Miller said an executive committee of 14 state attorneys general and several banking regulators has met with the five largest servicers — Bank of America, Wells Fargo, JPMorgan Chase, Citibank and Ally Financial/GMAC.
Miller said the investigation has broadened from reviewing foreclosure procedures to how loan servicers handled loan modifications, because in both cases, servicers "haven’t hired enough people and trained them well enough to do it."
Iowa’s attorney general said compensation funds — both for homeowners who shouldn’t have been foreclosed on, and for people who were eligible for loan modifications but didn’t receive one — are part of those discussions.