Nevada Wallops Bank of America With Sweeping Suit

Today, Nevada dramatically increased its lawsuit against Bank of America, expanding the case it initially filed late last year to encompass virtually all aspects of the bank’s mortgage operations. Bank of America has denied any wrongdoing. 

The implications of Nevada’s action could be far-reaching, potentially impeding the progress of a possible nationwide settlement between the five largest U.S. banks and the coalition of all 50 state attorneys general. This settlement seeks to address the banks’ foreclosure practices, such as the filing of thousands of false sworn statements with state courts. The suit also weakens a separate, 2008 multistate settlement in which Countrywide promised to evaluate troubled homeowners for loan modifications. 

Bank of America spokeswoman Jumana Bauwens said in a statement that a settlement would be more beneficial for homeowners than litigation. “We believe that the best way to get the housing market going again in every state is a global settlement that addresses these issues fairly, comprehensively and with finality.” 

The suit alleges that Bank of America and the now-defunct mortgage giant Countrywide, which Bank of America acquired in 2008, deceived borrowers and investors at almost every stage of the process. According to the suit, borrowers were misled into unaffordable loans and then further victimized through a misleading mortgage modification program. The suit also alleges that the bank filed fraudulent documents to move forward with the foreclosures. 

The stock of Bank of America, the nation’s largest bank and company that services mortgages, has dropped by 40 percent since March, in part due to its mortgage liabilities. Nevada’s action is unlikely to improve the situation. 

New York Attorney General Eric Schneiderman has taken a hard stance against Bank of America, initiating a broad investigation of the bank’s securitization practices and filing a suit alleging fraudulent foreclosures. Nevada’s Attorney General Catherine Cortez Masto’s expansion of the suit joins Schneiderman’s efforts in holding the bank accountable.

Last week, tensions within the 50-state coalition led by Iowa Attorney General Tom Miller came to a head when Miller removed New York’s Attorney General Schneiderman from the executive committee for allegedly working to “undermine” the coalition’s efforts to reach a settlement with banks over foreclosure practices. Reports suggest the settlement could be in the range of $20 to $25 billion, which includes a broad release from future legal claims. Schneiderman has publicly opposed this and continues to investigate the issue. 

Nevada’s Attorney General Masto has now added to the unease by filing a suit which signals the state’s potential rejection of any such settlement. This is echoed by Massachusetts and Delaware, who have also expressed concerns. Geoff Greenwood, the spokesman for Iowa’s attorney general, declined to comment on the suit. 

The suit also revives allegations that Bank of America breached a previous settlement with numerous attorneys general in 2008, in which the bank promised to implement a mortgage modification program to address charges of fraudulent marketing and lending practices. Nevada claims that Bank of America never fulfilled this promise. Furthermore, the suit alleges that Countrywide bungled the process of bundling loans into securities, and Bank of America fraudulently pursued foreclosure on homes without proper documentation. New York’s Schneiderman made similar charges earlier this month when he sued Bank of New York Mellon.

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