BofA Juggles Modification Litigation

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MORTGAGE EXPERT
12 · 17 · 10

Just as Bank of America Corp. seems to be on its way to resolving litigation filed by mortgage-backed securities investors over who will foot the bill for loan modifications, the State of Arizona has filed a new lawsuit against the Charlotte, N.C.-based company over the way it handles its loan modifications.

In 2008, MBS investors sued BofA subsidiary Countrywide Financial Corp. in New York’s state supreme court. At issue was an $8.4 billion predatory lending settlement with state attorneys general that BofA planned to let MBS investors pay.

The plaintiffs sought to force the defendant to repurchase loans that were modified under the predatory settlement. As much as $80 billion in securitized loans were potentially at stake.

On Wednesday, the company issued a statement indicating that it might be willing to negotiate. Attorneys for the plaintiff and BofA agreed to allow more time to “permit the parties to continue constructive dialogue around the concerns raised.”

On Friday, Arizona Attorney General Terry Goddard filed a complaint against Countrywide, BofA and other related entities in Arizona superior court. The lawsuit was prompted by “hundreds of consumer complaints” and follows a year-long investigation into the company’s servicing practices on loan modifications.

According to the state, BofA violated a March 2009 consent judgment requiring the implementation of a loan modification program. The state seeks an order that the defendant pay restitution to consumers, civil penalties and costs to the state. It also seeks $25,000 for each violation of the consent judgment and up to $10,000 for each violation of state law.

“Bank of America has repeatedly violated the judgment’s provisions related to loan modifications,” the news release said. “Instead of providing the relief to which eligible homeowners were entitled, Bank of America has failed to make timely decisions on modification requests and proceeded with foreclosures while modification requests were pending in violation of the agreement.”

BofA also violated the Arizona Consumer Fraud Act because it misled borrowers about its loss mitigation process and programs, the state said.

Borrowers unnecessarily depleted their savings to try and meet modification terms, and some actually ended up owing more after the modifications, the announcement indicated.

“Bank of America has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis,” Goddard said in the statement. “I am filing this lawsuit today because, after years of delay and broken promises, Arizonans should not have to wait any longer to seek redress.”

Greenwich Financial Services Distressed Mortgage Fund 3, LLC, and QED LLC, on behalf of themselves and all other persons similarly situated, Plaintiffs, against Countrywide Financial Corporation, Countrywide Home Loans, Inc., and Countrywide Home Loans Servicing LP, Defendants.
Dec. 1, 2008 (Supreme Court of the State of New York, County of New York).

State of Arizona, ex rel. Terry Goddard, Attorney General, Plaintiff, vs. Countrywide Financial Corp., a Delaware corporation; Countrywide Home Loans Inc., a New York corporation; Full Spectrum Lending Inc., a California corporation; Bank of America Corp., a Delaware corporation; Bank of America, National Association, a national bank; BAC Home Loans Servicing LP, a foreign limited partnership; Recontrust Company, N.A., a wholly owned subsidiary of Bank of America, N.A.; and Black Corporations 1-10.
Case No. CV 2010 033580, Dec. 17, 2010 (Superior Court of the State of Arizona in and for the County of Maricopa.

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