On August 31st, in an article by Gretchen Morgenson of the NY Times, it was reported that a complaint was filed with the United States District Court on August 30th. That complaint, filed by Attorney General Catherine Cortez Masto, accuses Bank of America of violating a broad loan modification agreement it presented in 2008 to state officials.
The settlement between Bank of America and several states was first reached in October of 2008, and then later with Nevada in 2009. The settlement was originally reached to satisfy accusations of predatory lending against Bank of America. Part of this deal was to help troubled borrowers with loan modifications and other financial relief. Bank of America set aside $8.4 billion for just this purpose.
Masto claims that Bank of America has not upheld their end of the agreement, and wants to end Nevada’s involvement with the above agreement. If permissions are granted, Masto states that she will be allowed to sue the bank over what she calls “dubious practices”.
These practices were uncovered by an investigation by the Attorney General’s office that started shortly after the agreement was meet, when complaints about the bank’s loan servicing methods flooded into Masto’s office from some of the 262,622 loans originated in Nevada.
The investigation claims that Bank of America raised interest rates when making loan modifications, even though they previously negotiated to lower them. Along with that claim, it is stated that Bank of America also proceeded with foreclosing on pending loan modifications, and did not offer qualified borrowers loan modifications to begin with. Bank of America also neglected to meet the settlement’s 60-day requirement on granting new loan terms. Loans would be pending for months on end with no resolution.
According to the complaint, Masto discovered that Bank of America had “materially and almost immediately violated the terms of the settlement”.
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