Arizona Sues Bank Of America Over Home Loan Modifications

The attorney general for Arizona is none too pleased with Bank of America. Earlier today, he filed a lawsuit against BofA, alleging the bank misled customers about its home loan modifications.

Arizona AG Terry Goddard charges that Bank of America violated a 2009 consent judgment in which the company agreed to implement a loan modification program for its Countrywide mortgage subsidiary. He claims that Arizona homeowners with BofA mortgages were duped into continuing to pay their mortgages because they were told by the bank that loan modifications were forthcoming.

According to Reuters, Arizona is seeking $25,000 per violation of the consent decree, and up to $10,000 for consumer fraud breaches. It also asks that Bank of America pay restitution to customers.

Bank of America is also being investigated by a joint 50-state committee (oh which Goddard is a part) on its mortgage servicing practices.

A rep for the bank tells Reuters:

Bank of America will continue to work towards fair and equitable foreclosure related practices through the multi-state attorneys general process with the goal of getting Arizonans assistance without the cost, delay and uncertainty of this litigation.

Arizona sues Bank of America on mortgage servicing [Reuters]
Arizona sues BofA for alleged mortgage fraud [AP]

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  1. DanRydell says:

    “He claims that Arizona homeowners with BofA mortgages were duped into continuing to pay inflated mortgages because they were told by the bank that loan modifications were forthcoming.”

    Where did that “inflated” word come from? I read both articles, and as far as I can tell people just continued to pay their normal mortgage payment.

    • obits3 says:

      So they were “duped” into paying their bills? Hmm…

      • pgh9fan1 says:

        It’s not like they were just making the homeowners pay their mortgages. The were under a consent decree and didn’t abide by its terms.

      • DanRydell says:

        Well, there is a point where foreclosure is inevitable and continuing to pay your mortgage doesn’t make sense. If you have no source of income and no prospects of changing that in the near future, you reach a point where it just doesn’t make sense to drain your bank accounts to try to avoid losing your house. That money could be used for more important things like food. But if there is a possibility that you’d qualify for a loan modification, that adds another variable to the equation and could compel people to continue paying their mortgages longer than they reasonably should.

        So the question is, did Bank of America intentionally deceive their customers to believe that they would qualify for a loan modification? That’s something that we probably won’t find out anytime soon.

      • Pax says:

        The court ordered the bank to re-adjust those loans to a lower payment-schedule.

        The bank strung the customers along wiht the old, still-high payments with the (empty) promise that the adjusted-to-be-less payments, which the court ordered them to offer, came along.

        So, they were duped into paying bills that were materially higher than they should have been.

    • XianZhuXuande says:

      I think I see the meaning behind this. A struggling family, on the brink of bankruptcy, may have tried to continue paying their mortgage just a little longer to make it through to the loan modification, which would be unfortunate if nothing of the sort came along.

      “Inflated” because adjustable rates had increased.

      And in response to the ‘wah, pay your bills’ mentality, while plenty of stupid people and deadbeats skipped out on loans during this period, there were also plenty of people who had been legitimately scammed or mislead by banks, Countrywide being one of the biggest offenders. So on that note, no need to assume that *all* of the people in this position are there because they are lazy or unethical.

  2. ChuckECheese says:

    For all you ‘just pay your mortgage already’ teabaggers, you seem to conveniently forget that the banks ripped America off big time. Anybody on the inside of this mortgage mess knew long ago that the inflated housing prices, the too-easy underwriting, the bundling and reselling of these bad loans as investments, was all part of a huge fraudulent scheme. That scheme is far more heinous than any individual’s responsibility to repay a mortgage that was based upon lies, manipulation and greed. I believe the mortgage scheme was more heinous than the aggregate of all Americans’ responsibilities to pay their loans. All these banks should be forced to refinance at current market values and write off any difference, because the bubble prices were hallucinatory. Every pot smoker in prison should be bumped out and replaced by somebody who underwrited or in any way abetted this disaster.

    You make it sound like it’s only a matter of individuals not wanting to pay their mortgages. You know, I could agree with somebody to have them cut my nuts off with a butter knife in a fast-food bathroom, but guess what? It’s not legal, so even if I wrote up a contract to have my nuts cut off with a butter knife in a fast-food bathroom, it’s not legal. Same with these mortgages. The whole thing was outrageous and illegal from the get-go, and the big perps were the ones with the knives, not the ones who put their balls on the table for a chance at owning a home.

    My brother and his wife are Arizonans who were multiply screwed over by B of A. They were told they qualified for a TARP-remod, paid some fees, turned in a bunch of paperwork, told they were approved, then 5 months later, B of A reneged and told them they made a mistake and they weren’t qualified after all, no reasons or opportunity for appeal provided. Total waste of time and effort and money and sanity.

    And in AZ, B of A already had a consent decree in place to require these banking goons to do refis, which they ignored. The state tried to work with B of A for over 6 months, but B of A wouldn’t cooperate. And why should they? There have been virtually no civil or criminal consequences for the banks throughout this decade-long plundering of the nation. Why should they pay attention? This BS won’t stop until the bankers start ending up in prison for fraud.

  3. brownhb says:

    I love Terry Goddard. Him not winning the governor’s seat over Janet Brewer (shudder) was the saddest part of November’s elections.

    • ChuckECheese says:

      Now Jan’s going after organ transplant patients and old people in nursing facilities. Recently she said we need to stop paying for people to live in these places, and that we need to stop paying for transplants because people don’t live that much longer after getting one anyway. She’s a delight for sure.

  4. OnePumpChump says:

    You know it’s serious when Arizona stops sucking corporate cock long enough to object.

  5. CWG85338 says:

    BofA and all the other banks that participated in the scam knew what they were doing, and it was precipitated by pure greed. Bankers played on the common misconception about home ownership that values will “always” rise, and offered tons of low interest loans to people who don’t understand how the market works, and who couldn’t possibly afford to buy the amount of house they did.

    If banks used previously accepted standards for loan qualification, many more loan apps would have been rejected. This would have stagnated the housing market, which would have made it impossible for banks to increase their market cap enough to satisfy greedy execs who are inordinately compensated in stocks. Low stock prices mean low bonuses, and we can’t have any of that!

    So the bankers used their overwhelming information advantage about the real estate market to manipulate buyers into purchasing too much house, raising home values (good for them) and putting millions of people at risk (bad for us). How is this not fraud?

    I have asked the same question as many of you – why does no one go to jail for this activity? That answer is the same as in every case in which enormous wealth is involved – just follow the money.

    We need to start talking with our feet. If a bank or other business acts in bad faith, don’t do business with them. Why does anyone have personal accounts with Chase? They just announced huge increases in the amount and types of fees that accompany your banking relationship. Move your money to a small bank that has fewer fees and remembers your name when you walk in. Just walk away and don’t look back!

    • hansolo247 says:

      Information advantage? Guess that worked out well for them.

      I used my overwhelming information advantage from my econ degree to not buy a house in FL for 3x what it’s worth. I also told all of my friends to sell, and at any price in 2007. Some did, some didn’t, some thought I was nuts.

      No one thinks I’m nuts now, and many of my friends did sell on my advice and are extremely thankful.

  6. hansolo247 says:

    So, the banks made bad loans, and lost a lot of money. They should be divesting themselves as we speak, but nooooo, Bush, Obama, and Bernanke have done them a huge solid by providing as much free money as they want…and paying THEM for doing so.

    The “buyers” didn’t lose anything, other than 200 points on their credit (which isn’t harsh enough). Basically, what they sunk into the place is rent. And they got to deduct a lot of that on their taxes, too. The foreclosure process is there to unwind the contract if it goes bad…all of this modification mess has been determined to be the worse option…anyone have proof it isn’t?

    We don’t have debtors prisons here, so what are the people being “swindled” actually losing again? Assets…nope. Free place to live over the course of a foreclosure, plus extra cash not to trash the place? Yep.

  7. Chaotic Evil says:

    They sound like they’re taking it very seriously.

  8. PortlandBeavers says:

    The saddest thing is that BofA really didn’t get into the most extreme end of the mortgage business during the boom. They were relatively restrained. Most of the mess they were in now is the result of the government-imposed shotgun wedding with Countrywide. I’m not sure if this is the worst merger of all time (Time-Warner buying AOL and Daimler-Benz buying Chrysler come to mind), but at least the other companies in the merger Hall of Shame went in voluntarily.

  9. Mae Jo says:

    I live in Louisiana and went throught hell with Bank of America. I filled for a loan modification back in 2009 and was told that I was approved a year later thank a couple of months went by and received a letter stating I was denied. I could go on and on with what Bank of America did to me but I am not it all boiled down to me having to file bankruptcy. What is that I would need to do to join the lawsuit against Bank of America?