Foreclosuregate: Bank of America mess

Many pundits like to excoriate people who supposedly cheated by buying houses while misstating their income. However, it is clear to many studying the current economic crisis that the processes and systems at the major banks are weak. In many instances they are civilly and perhaps criminally negligent, and in some cases fraudulent behavior on the part of banks, servicers, and their lawyers has been noted. An article today in the Huffington Post by Mary Bottari called Trapped in Bank of America Hell the case of one normal middle class family which has always been on time in its mortgage payments is told:

Are you one of the lucky ones? Have a good job, live in a nice neighborhood, enjoy your cozy home? Think foreclosure only impacts the reckless or the unemployed?

Think again.

George Mahoney worked and saved and built his cozy, colonial-style home in Lynnfield, Massachusetts, in 1981. There, he and his wife raised three lovely daughters. For many years, the Mahoneys paid down their relatively small mortgage with their local bank — a division of Bank of America (BofA). In 2007, they took out a second mortgage to help a daughter start a small business. Two wage earners, a great credit record — the loan was a breeze. That was when the trouble began.

About a year after getting the second mortgage, BofA started notifying George that his payments were late. Soon they jacked his credit card interest rates from 7 percent to 28 percent. Next, they ruined his credit record. His Sears card dropped from a $10,000 limit to a $500 dollar limit. Then one day in the fall of 2009, BofA initiated foreclosure on the house he had built and owned for 28 years…

The Mahoney’s experience indicts endemic accounting problems at BofA. Payments are misapplied constantly and the default position is abusive foreclosure. The bank reports some 1.3 million customers behind on their payments, but can regulators trust any data coming out of BofA? How many of these people are trapped in the same hell as the Mahoneys?

But finally the states Attorneys General are getting around to suing the bank. Reuters reports that Arizona is suing the Bank of America there:

The state of Arizona sued Bank of America Corp on Friday, accusing the nation’s largest bank of routinely misleading consumers about home loan modifications.

The lawsuit, filed by Arizona Attorney General Terry Goddard’s office in state court, seeks potentially massive fines against the bank and compensation for customers.

It accuses Bank of America of violating a 2009 consent judgment in which it committed to widespread home loan modifications. The bank failed to follow through, leaving borrowers in limbo, according to the suit.

The bank is also accused of violating the state’s consumer fraud act.

Arizona is seeking $25,000 per violation of the consent decree, and up to $10,000 for consumer fraud breaches. It also asks that Bank of America pay restitution to customers.

There are also suits in ALL of the other 49 states under investigation, that are being nationally coordinated by Iowa Attorney General Tom Miller.

Go get ’em guys.

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