The Bank of America lawsuit is the result of a massive class action filed in the U.S. District Court for the Central District of California by eleven borrowers who said that the company had denied them the right to refinance their mortgages. While the settlement does not absolve the bank of criminal charges, it does remove the burden of proof on the company from its consumers. The case has garnered much media attention and brought the mortgage industry back into the spotlight.
In August 2013, the U.S. Attorney’s Office filed a lawsuit against Bank of America in the Western District of North Carolina.
The complaint alleged that the bank had misled borrowers who were trying to keep their homes and enriching themselves by taking advantage of the federal mortgage-modification program. The suit claims that the financial institution made millions of dollars by misleading borrowers and forcing them to guarantee bad loans. The banks’ conduct was so pervasive that they forced taxpayers to take on more risk and risky loans than they could afford.
The Bank of America lawsuit was filed in federal court in Charlotte, North Carolina, and claims that the financial institution knowingly misled borrowers to keep their homes. In other words, the bank deceived borrowers and enriched itself by exploiting the federal mortgage-modification program. The federal government bailed out Countrywide Financial in 2008 and now continues to press the company to repurchase these loans.
The Bank of America lawsuit against Fannie Mae and Freddie Mac is ongoing litigation.
It alleges that the bank inflated loan prices and failed to provide honest and comprehensive information about their loans. The company repaid some loans but did not dispute others. As a result, the government is threatening to sue the bank with huge fines. If the government proves its claims, the damages could reach $3 billion.
The lawsuit also claims that Bank of America profited from borrowers by imposing unfair fees on mortgages. The judge found that the bank failed to disclose the fee structure and enriched itself by charging borrowers for property inspections that were not required and that the bank was not required to inform the borrowers of the fees. The court has yet to rule on the merits of the case, and it is unlikely that the case will be settled until the trial.
The lawsuit alleges that the Bank of America mortgage was fraudulently issued by the government.
The bank violated the law when it sold some of these loans to borrowers who later defaulted on them. By delaying payments on those loans, the lender was able to profit by misrepresenting the true costs of its mortgages. The company was not required to make such payments, but its actions may have caused thousands of homeowners to lose their homes.
The lawsuit alleges that the Bank of America fraudulently profited by charging borrowers for unnecessary property inspections and failed to inform them of these costs. According to the lawsuit, the bank has to pay $117,130 in liquidated damages to homeowners who were unable to make mortgage payments. The money is to be used for community development and foreclosure prevention. These are vital goals of the government and should be pursued if the government is serious about the issue.
The Bank of America lawsuit claims that the company misled borrowers looking to hold onto their homes to avoid foreclosure.
The U.S. Treasury Department launched the HAMP program to help struggling homeowners avoid foreclosure. Despite the HAMP program’s good intentions, the company’s actions undermine the integrity of the federal system and the rights of the borrowers. Ultimately, these two companies are responsible for the mortgage modification process.
The lawsuit also cites numerous cases in which the Bank of America has misled borrowers to avoid foreclosure. In the most recent instance, the Bank of American has allegedly misled borrowers in a scheme to enrich itself by selling loans to people who cannot afford them. Interestingly, the company also admitted that it did not make any effort to disclose the fraudulent activity. While the company did not intentionally make the loans containing delinquent loans, it has been accused of this and now faces an additional billion-dollar fine.