The proposed national settlement with the five largest U.S. banks over foreclosure fraud seems to be in further jeopardy today, following a
massive expansion by the state of Nevada of its lawsuit against Bank of America.
Nevada's attorney general charges that Bank of America and the now-defunct mortgage giant Countrywide acquired by the bank in 2008, deceived borrowers and investors at almost every stage of the process.
According to the suit, borrowers were duped into unaffordable loans and then victimized again through a misleading mortgage modification program that homeowners tried to use to avoid foreclosure. Finally, the suit alleges, the bank filed fraudulent documents to move forward with the foreclosures.
"Taken together and separately, [Bank of America's] deceptive practices have resulted in an explosion of delinquencies and unauthorized and unnecessary foreclosures in the state of Nevada," the suit alleges.
The state's suit had previously been confined to the modification issue. At that time, Bank of America also said homeowners would be best served not through litigation but through reaching a multistate settlement that would "broaden programs for homeowners who need assistance."
By expanding the suit, Nevada's Catherine Cortez Masto joins New York Attorney General Eric Schneiderman in stepping up investigations of the bank. In addition to initiating a broad investigation of banks' securitization practices, he recently filed a suit charging that Bank of America had fraudulently foreclosed on homeowners.[...]
Last week, fissures in the coalition became public when Iowa Attorney General Tom Miller, who leads the 50-state coalition, removed New York's Schneiderman from the group's executive committee because, he said, Schneiderman had "actively worked to undermine" its efforts by opposing any quick settlement. As part of any settlement (reportedly in the range of $20 billion to $25 billion), the banks have been seeking a wide-ranging release from future legal claims, not just those related to foreclosure practices. Schneiderman has publicly rejected that idea and pushed ahead with his investigation.
Masto's suit signals that Nevada may also reject any settlement in the near future on the foreclosure issues. Two other attorneys general, notably those from Massachusetts and Delaware, have also voiced concerns recently about any broad waiver of claims.
In more bad news for BoA, they're facing an additional federal suit by homeowners in New York, "seeking to block a proposed $8.5 billion settlement between Bank of America and major mortgage investors, including BlackRock, Pimco and the Federal Reserve Bank of New York. The suit says the deal fails to address widespread servicing problems and would actually speed up foreclosures." That's also one more nail in the coffin of the national settlement, which could be good news for victims of foreclosure fraud and those currently facing foreclosure.