A group of Nevada homeowners fighting Bank of America over the threatened foreclosures of their homes has joined a national class-action lawsuit against the bank.
The group of about two dozen plaintiffs, represented by Las Vegas attorney Matthew Callister, initially filed suit April 18 in Clark County District Court in Las Vegas alleging deceptive trade practices.
The suit claimed Bank of America misled the homeowners by promising to respond to requests for mortgage modifications, and assuring them foreclosures would be put on hold while modifications were considered, but then moving ahead with foreclosure proceedings anyway.
These and other allegations are similar to those in a lawsuit filed last year against the bank by Nevada Attorney General Catherine Cortez Masto.
The Cortez Masto lawsuit is pending in federal court, where Bank of America has denied the allegations of wrongdoing.
Callister’s lawsuit on behalf of homeowners, in the meantime, was first transferred to federal court in Las Vegas and was then moved to Massachusetts, where it’s part of the national class-action against the bank.
The lawsuit there complains that after accepting $25 billion from the U.S. government in 2008 as part of the Troubled Asset Relief Program (TARP), and a partial guarantee against losses on $118 billion in mortgage-related assets, "Bank of America agreed that it would participate in one or more programs that TARP authorized the Secretary of the Treasury to establish necessary to minimize foreclosures.’’
One of these programs was the Home Affordable Modification Program (HAMP) aimed at providing affordable mortgage loan modifications and other assistance to struggling homeowners.
The Massachusetts suit says Bank of America agreed in April 2009 to comply with HAMP.
"Rather than allocating adequate resources and working diligently to reduce the number of loans in danger of default by establishing permanent modifications, B of A has serially strung out, delayed and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted billions of dollars from the United States,’’ the lawsuit charged. "B of A’s delay and obstruction tactics have taken various forms with the common result that homeowners with loans serviced by B of A, who are eligible for permanent loan modifications, and who have met the requirements for participation in HAMP, have not received permanent loan modifications to which they are entitled.’’
The suit, among other things, seeks an order requiring Bank of America to offer permanent modifications to homeowners represented by the class action who had received temporary modifications; and an order requiring the bank to appropriately train its employees about their duties under HAMP.
Bank of America is seeking dismissal of the Massachusetts class-action suit.
"One of the most critical HAMP program facts that plaintiffs continually ignore is that during the period in which nearly all of the named plaintiffs applied for HAMP consideration, servicers were permitted to place borrowers into a HAMP TPP (trial period plan) based upon the borrower’s unverified representation of income, and to collect later documents to verify that income Unsurprisingly, this process sometimes resulted in borrowers being ineligible for HAMP when their income was later verified,’’ the bank attorneys wrote in a February dismissal motion.
The bank attorneys also wrote that under HAMP, loan servicers may attempt to adjust the borrower’s monthly mortgage payment to 31 percent of total pre-tax monthly income.
If this 31 percent of income payment can be achieved, the servicer also subjects the loan to a Net Present Value (NPV) test, the bank attorneys wrote in their filing.
"If the NPV test produces a `negative’ result (meaning that losses from foreclosure are less than losses from modification), the servicer may not modify the loan,’’ the Bank of America attorneys argued.
The class-action lawsuit is progressing as national news reports suggest an investigation by state attorneys general has resulted in an ultimatum to Bank of America and other big mortgage lenders and servicers like Wells Fargo & Co. and JPMorgan Chase & Co.: Address improper foreclosure practices or face liability of $17 billion in civil lawsuits.
The Wall Street Journal reported Wednesday that the $17 billion figure was put on the table Tuesday in discussions with the banks as efforts continue to achieve a global settlement of charges consumers nationwide were harmed by "robo-signing’’ and other controversial foreclosure practices.
A settlement seems far away as the banks have proposed paying $5 billion to compensate homeowners harmed by foreclosure abuses and provide transition services to people losing their homes, the Journal reported.
The investigation of foreclosure problems is just one headache for Bank of America, Wells Fargo, JPMorgan Chase and other big mortgage lenders and servicers.
In recent weeks the attorneys general of California and New York have launched broader investigations of how, during the boom years of the mid-2000s, mortgages were originated and then packaged together as securities by Wall Street. With many of these securities backed by fraudulent loans, including inflated appraisals, the resulting vast home-loan defaults in part triggered the nation’s near financial meltdown in 2008.
For Nevada and Las Vegas, hardest hit in the nation by the foreclosure crisis, these investigations could yield new information on the mortgage crisis that continues to harm the economy.
"All indications are that last year’s robo-signing scandal, in which banks were found to have filed false court documents in foreclosure cases, was just the tip of an iceberg. A growing body of congressional testimony, academic research, court cases and other evidence suggests pervasive defects, and potentially vast lawbreaking, in the securitization and foreclosure process,’’ the New York Times said in a May 17 editorial.