On Friday, Arizona and Nevada both filed suit against Bank of America, saying it deceived homeowners trying to avoid foreclosures. The suits allege that Bank of America knowingly misled homeowners in the loan modification process, regularly promising quick help when the process instead dragged out over months if not years, foreclosing on homeowners during the modification process despite promises that homeowners would be safe and making “false” promises to homeowners that their trial modifications would become permanent, among other complaints.
A Bank of America executive told the Arizona Republic that he was “disappointed” in the suits and said the bank is already working to improve its processes and programs. “We and other major servicers are currently engaged in multistate discussions to address foreclosure-related issues more comprehensively,” he said.
The Arizona case also says the bank repeatedly violated the terms of a multi-state, $8.68 billion settlement with Countrywide (now a subsidiary of Bank of America) to provide loan modifications for homeowners with troubled loans. A recent investigation by the Nation magazine tore into the settlement, calling it a “fiasco” that failed to help homeowners as promised.
“I felt like I was always lying to borrowers”
Interviews with former bank employees provide a window into the bank’s call centers. One employee told the Nevada Attorney General’s office, “I felt like I was always lying to borrowers,” saying they were told to mislead homeowners about the status of their applications. The employee complained to a supervisor, and says of what happened next: “Her instructions in response were just to give the borrowers their status and to tell them that they are ‘in the process,’ in spite of the fact that the computer showed that nothing was happening.”
Other employees bemoaned the poor training Bank of America provided its staff. One said, “The main point of the training is to teach us how to get customers off the phone in less than ten minutes.” Another said, “Nobody at BOA seems to care what we actually say to the borrower, as long as we get them off the phone.”
“Asking for a third, fourth or fifth time”
Homeowners have long complained about slow communications by Bank of America and other mortgage companies, but it looks like they’re not alone. The Arizona complaint lists eight different dates when the AG’s office had to repeat its requests for responses to consumer complaints. This includes a date in March of this year when "the Office sent the Bank a list of 46 consumer complaints for which it was awaiting a response, including several for which the office was asking for a third, fourth or fifth time.”
“Bank of America had full authority”
Loan servicers regularly tell homeowners that the investors who own their mortgage won’t allow any modifications. As we’ve reported before, that excuse is cited far more often than is justified, and few mortgage deals include such restrictions. Bank of America has testified before Congress about this as well, but when pressed, an executive admitted that “very, very few” investors prohibit modifications.
Both the Arizona and Nevada suits take up this issue, saying “Bank of America notified consumers that their modifications were declined by the investors in instances where Bank of America had full authority, without the investors’ approval, to offer modifications.” If there was a legitimate restriction, the states say the bank did not properly try to get approval from investors.
“Take it or leave it”
The State of Nevada allows homeowners to request face-to-face mediation conferences with banks and other companies that service loans if they are facing foreclosure. The Nevada suit alleges that Bank of America acted in bad faith in the mediations, sending attorneys without the authority to negotiate, reneging on modification offers and even failing to show up at the conferences entirely. It cites one mediator’s findings that Bank of America engaged in a “ ‘Boulware-like’ bargaining strategy and a ‘take it or leave it’ basis,” that forced homeowners to compromise under duress.