The Kings and Queens Loan Mod Scammers: Arizona & Nevada Sue Bank of America Over Loan Modification Program
I remember a couple of years back now, when Arizona Attorney General Terry Goddard was watching his state go down the foreclosure rat hole, and he was being greeted most days by a parade of banking types who were telling him that it was they who had the answer, and certainly not the law firms and other professionals who were offering to help homeowners get their loans modified for the dreaded up front fee.
Back then, if you recall, President Obama was new in his office, and he had told us all that loan modifications were free. He had recently given a speech, in Arizona by the way, announcing his new Making Home Affordable plan that he said would save 3-4 million homes from foreclosure, and the cheering in response was louder than at any speech I could remember.
Back then, for the most part, we all believed that Barack Obama was two things: smart, and a man of the people more than a man of Wall Street. We believed that, although Bush’s plan to save homeowners from foreclosures was an abysmal failure, certainly Obama’s plan would not meet the same, or even similar fate.
So, when he said that loan modifications were “free,” and that all one needed to do was call the government’s toll-free hotline or, in lieu of that, their bank directly, people believed him. And very soon, that made anyone who charged a fee to help a homeowner get their loan modified, a “scammer,” just by virtue of them charging a fee for their services.
Those that were reading me back then know that I never was comfortable drawing that conclusion. Not that I wanted to ever see a homeowner at risk of foreclosure get ripped off, in fact that’s the last thing I’d ever want to happen. But it never made sense to me that something like getting a loan modified would be “free”. I mean, getting my loan in the first place wasn’t free. And I’d never hired a lawyer or other professional for free in the past. Why would that now be free?
Oh sure, I recognized that the government had a toll-free hotline, and in fact when Obama announced its availability, I called it myself dozens of times… and it worked about as well as I expected a government hotline to work, that is to say, not at all.
But the idea that one could simply call their bank directly and ask them to modify their loan, and that would lead to their loan being modified, never rang true with me. I’ve tried calling my bank many times in the past, and for many reasons. And it never had gone well. I said recently in an article that it would be faster for me to drive to my bank to see if it’s open than it would be for me to call and find out.
Banks don’t reduce the amount of money you owe them easily… they don’t have a give-the-money-back department. So, when Obama said call your bank directly, or that there was a government hotline available, neither option sounded better than me paying a lawyer or other professional to help me get it done. Maybe some would call a HUD counselor, and maybe it would work out okay for them, but for me personally, I knew that I’d rather pay for the services I need, and that’s just me.
So, back then Terry Goddard was finding himself being approached on numerous occasions by bank industry people and they were all assuring him that the homeowners of his state were perfectly right to simply contact their banks directly when they needed to get their loans modified… and that would help control the growing foreclosure crisis that was fast destroying his state’s economy and the lives of countless homeowners.
So, he believed them, and he went out and told the homeowners of Arizona that they should not pay someone to help modify their loans, but rather they should contact their banks directly. And people listened to what he said, and they followed his advice. But it didn’t work, and in fact it became a nightmare for all who tried it his way. And many came back to his office and said… WTF?
And Terry Goddard felt like he had been deceived. He wasn’t exactly sure what the answer was, but he now knew that it certainly wasn’t as simple as telling folks to call their banks directly.
So, when the opportunity came up to investigate the banks as a result of things like robo-signers fraudulently signing affidavits in order to foreclose on people’s homes, came to light, Terry Goddard was one of the state attorneys general to jump in with both feet. And this past week it was announced that the state of Arizona and Nevada are both suing Bank of America.
Is it “the” answer? Probably not. But is it a step in the right direction? I think it unquestionably is.
In broad terms, Arizona’s lawsuit accuses the bank of misleading consumers. According to Bloomberg:
“The bank is accused in the Arizona and Nevada lawsuits filed yesterday of misleading consumers about requirements for the modification program and how long it would take for requests to be decided. The bank provided inaccurate and deceptive reasons for denying modification requests, according to the suits.”
In a statement released by the office of Arizona’s Attorney General, Goddard explained that instead of working to modify loans in a timely basis, Bank of America went ahead and foreclosed on homes while the borrowers were awaiting a decision on their application for such a modification, and that violates a 2009 agreement with the state to help people who were at risk of losing homes.
Again, according to Bloomberg:
“The Arizona lawsuit, filed in state court in Phoenix, seeks a court order holding the Charlotte, North Carolina-based bank in contempt for violating the agreement and requiring it to pay as much as $25,000 for each violation of the accord plus as much as $10,000 for each violation of the state’s consumer-fraud law.”
I also think it’s more than safe to assume that the announcement by Arizona and Nevada that they are suing Bank of America is the beginning of a much larger movement, and not the end. All 50 states attorneys general are currently investigating whether the bankers have used fraudulent documents to provide the legal justification to foreclose on homes. And that’s not the sort of investigation likely to go away quickly or without some price being paid by someone, in my view.
The Bloomberg story also quoted Bank of America spokesperson, Dan Frahm, as saying:
“We are disappointed that the suit was filed at this time. We and other major servicers are currently engaged in multistate discussions led by Attorney General Miller in Iowa to try to address foreclosure related issues more comprehensively.”
And all I have to say to that, is that, as statements go, is it is beyond disingenuous. No one involved believes that your bank gives a damn, Mr. Frahm. Oh, we believe your bank is disappointed, all right, but only that it was caught, and that now someone with some legal clout is finally taking you to task and using the court system to do it.
Remember… Bank of America is one of the banks that announced that it was stopping foreclosures in the 23 judicial foreclosure states back in October, and then in all 50 states, but just a couple of weeks later announced that it had reviewed more than a hundred thousand loans and determined that everything was just fine and dandy. Nonsense, Mr. Frahm… even a child could see through that and say… nonsense.
Bloomberg’s story lists the following case specific information:
The Arizona case is Arizona v Bank of America, CV2010- 33580, Maricopa County Superior Court (Phoenix). The Nevada case is Nevada v. Bank of America, Eighth Judicial District Court, Clark County (Las Vegas).
To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
Mandelman out.
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