Lawsuits Accuse Bank Of America Of Helping Developer Trick People Into Buying Worthless Land

Fifteen separate lawsuits recently filed in U.S. District Court accuse Bank of America of defrauding homebuyers by allowing an insolvent developer to take their money for properties in a subdivision that were not only never built, but also had no roads, sewers, or other utilities.

The plaintiffs claim that BofA openly recruited potential homebuyers at the Lake Lure, NC, subdivision and set up shop next to the developer’s on-site office for that purpose.

The developer ended up selling 435 lots — about half of which were financed by BofA, according to the complaint — for a total of $90 million. But then the company went bankrupt in 2008, claiming it only had $905 left in its accounts.

From one of the lawsuits:

“At the same time the developers and the bank were making representations concerning the numerous amenities that would be built in the community, as well as the timing of the construction of those amenities, the developers knew that developing the community was impossible because, among other reasons, they were negligently or intentionally permitting or causing the distribution of funds needed to construct the required infrastructure to themselves and to other entities, without consideration, thus rendering the developers insolvent and unable to meet their financial obligations….

“The bank was enriched by this scheme to sell lots at inflated prices to the plaintiff because, among other reasons, it received loan origination fees that were a percentage of the total amount of each loan that the bank made to individuals who purchased lots in Grey Rock; it received a stream of interest payments on the loans; its employees were compensated based on loan volume; and its executives were compensated in part based on stock performance, which was tied to the bank’s financial statements, which, in turn, were enhanced by these loans, at least in the short term.”

The lawsuits also allege that BofA staffers made false statements to potential borrowers, claiming that buyers could flip their properties before they ever had to make their first mortgage payment, all while knowing — at least according to the plaintiffs — that the bank knew there was no way the developer could afford to build out all the infrastructure needed to make these plots livable.

One plaintiff claims that he expressed concerns to a BofA loan officer about the bank financing loans on raw land with only 5% down payments. In the plaintiff’s previous experience, banks would not loan money on raw land without at least 50% down.

The loan officer allegedly told the plaintiff that the developer “was highly reputable and well funded” and that was “overly concerned and that since he had been out of banking for over ten years, he was out of touch.”

The plaintiffs each seek compensatory and treble damages for violations of the Interstate Land Sales Full Disclosure Act, deceptive trade, negligent misrepresentation and fraud.

15 Customers Scorch Bank of America

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  1. Press1forDialTone says:

    Bank of America = the Italian mob lives!

    • Greg Ohio says:

      They’re not Italian

      • GearheadGeek says:

        In fairness, they’re as Italian as the US manifestation of the Cosa Nostra… started by an Italian-American named Amadeo Giannini in a merger between Bank of Italy and the original Bank of America.

        • twitley says:

          Actually they are the old North Carolina National Bank, who under Hugh McColl captured C&S/Sovran and renamed itself Nationsbank, then captured Bank of America and acquired its name and reputation via a reverse merger. Thus equipped, they seem to have displayed talents comparable to those of Charles Ponzi, Snidely Whiplash, and the robber barons of the Golden Age.

      • TastyBeverage says:

        Fine…..Italian-American

      • Difdi says:

        They’re the Bank of Italy after a rename.

  2. Blueskylaw says:

    Thank you Bunk of America for continuing to poop on our dreams.

    http://partiallyclips.com/2002/05/26/mr-jeepers-3/

  3. crispyduck13 says:

    So anyone remember that movie Boiler Room where Seth works at a crooked brokerage firm that just completely fucks people over after they purchase stock? It was a great movie actually.

    Anyway, at the end the FBI raids the building and arrests everyone for fraud and a bunch of other crap. Seems like that is exactly what should be happening here to everyone at BOA headquarters. Instead we throw taxpayer money at them (correct me if I’m wrong) to save their ass after screwing up so badly.

    • finbar says:

      The company from the Boiler room movie wasn’t “too big to fail…”

      But as we learned from the Citbank exec, bigger is better!

  4. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    “The lawsuits also allege that BofA staffers made false statements to potential borrowers, claiming that buyers could flip their properties before they ever had to make their first mortgage payment, all while knowing — at least according to the plaintiffs — that the bank knew there was no way the developer could afford to build out all the infrastructure needed to make these plots livable.”

    I’m not sure if I feel sorry for the borrowers. I don’t feel sorry for BofA. Sounds like a big dose of greed got everyone into trouble here.

  5. deadbirds says:

    I am shocked….just SHOCKED that BOA was involved in something so underhanded………
    couldn’t even get that out! Why is this bank still doing business? Why do people keep going there with their money?

  6. Galium says:

    Bank of America, continually screwing people over for generations. It does bring back memories, the Edgar Allen Poe type. I am still waiting for my $50.00 plus interest from 1968. A plague on your bank and everyone above teller. Ebola for the top ten, with DVD’s of their last 30 days so I can buy a copy.

    • Blueskylaw says:

      The DVDs will be provided for free by JP Morgan to
      everyone who opens a new checking account with them.

  7. NanoDog says:

    so well to do buyers want to buy land, and BOA lends them money…
    Buyers don’t do their own due diligence and that’s BOA’s fault…

    I do believe that BOA is the devil.. but really…

  8. Trjgul says:

    “The plaintiffs claim that BofA openly recruited potential homebuyers at the Lake Lure, NC, subdivision. . .”

    Looks like those homeowners. . .

    *sunglasses*

    . . . swallowed it hook, line, and sinker.

    YEEEEEAAAAAAAAAAHHHHHHHHH