Nevada Attorney General Goes After Bank of America for Allegedly Violating Countrywide Fraud Settlement

Nevada Attorney General Catherine Cortez Masto is accusing Bank of America of violating its fraud settlement regarding Countrywide Financial Corp. She is asking the court to “terminate our consent judgment” because she says the violation is “such a material breach.”

Masto claims that instead of honoring the terms of their agreement, Bank of America has:

• Continued to take part in fraudulent activities that allow contracts to stay in place
• Gone back on its promise to lower interest rates when revising the loans of buyers in trouble and instead has raised them.
• Failed to give qualified homeowners the promised loan modifications
• Proceeded with foreclosures even though modification requests by borrowers were still pending
• Not met the 60-day requirement to grant new loan terms

Masto says that numerous complaints have been submitted to her office over modified mortgages that come with new contracts that are more expensive than what was originally stated. Ending Nevada’s participation in the settlement agreement would let the state file a securities lawsuit against the bank over its allegedly questionably practices.

Countrywide, which was acquire by Bank of America, settled lawsuits with a number of states, including Nevada over what they contend was predatory lending practices. To settle the complaints, the bank promised to designate $8.4 billion as direct loan relief, waive tens of millions of dollars in prepayment penalties and late fees, put aside money to help people in foreclosure, help 400,000 borrowers with financial relief, and suspend foreclosure on borrowers that were delinquent and had the most high risk loans.

Unfortunately, in Nevada, where 262,622 Countrywide loans were originated, foreclosure issues piled up, as did complaints about the bank’s loan service practices. Nevada’s new complaint also accuses Bank of America of:

• Telling credit report agencies that consumers who weren’t in default were in default.
• Deceiving borrowers about the reason their requests for loan modifications were turned down.
• Incorrectly claiming that borrowers that had made payments on trial loan modifications hadn’t paid.
• Falsely claiming that loan owners wouldn’t allow changes to mortgages.
• Misleading borrowers with loan modification offers that came with one set of terms but then returning with a different deal.
• Limiting the amount of time employees could help troubled borrowers with their loan-related issues and punishing those that violated these restrictions.
• Not providing the required loan documentation when it packaged mortgage securities and sold them to investors.
• Failing to endorse a mortgage note, per the typical pool and servicing agreements made between investors and Countrywide, and not delivering it to the trustee in charge of the pool.

Nevada says that Such paperwork failures should have prevented the bank from being able to foreclose on borrowers.

Masto’s request to get out of the Countrywide settlement could impact other negotiations by other state attorneys general related to allegedly improper foreclosure practices against Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo. These banks are being asked to put out approximately $20 billion toward loan modifications. Discussions here have been delayed because there is disagreement over whether a settlement would let state regulators sue the banks over questionable practices in the future.

Related Web Resources:
Nevada Says Bank Broke Mortgage Settlement, NY Times, August 30, 2011

Nevada’s Attorney General pursues BofA, UPI, September 19, 2011

Nevada Goes to War Against Bank of America, Consumer Affairs, September 2011

More Blog Posts:
Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

Countrywide Finance. Corp, UBS Securities LLC, and JPMorgan Securities LLC Settle Mortgage-Backed Securities Lawsuit Filed by New Mexico Institutional Investors for $162M, Institutional Investor Securities Blog, March 10, 2011

Bank of America and Countrywide Financial Sued by Allstate over $700M in Bad Mortgaged-Backed Securities, Stockbroker Fraud Blog, December 28, 2010

Shepherd Smith Edwards & Kantas LTD LLP represents securities fraud victims throughout the US. We are not afraid to go up against a Wall Street firm to recoup our clients’ losses.