Bank of america class action lawsuit mortgage

Reading Time: 2 minutes

Table of Contents Show

Help support this work
What did Bank of America do wrong?
What is Bank of America doing?
What bank is associated with Bank of America?
Is Bank of America same as Bank of America NA?

Struggling homeowners who were overbilled by two Countrywide Financial subsidiaries for services such as lawn care and home inspections at the height of the subprime crisis will share a $108 million settlement, the Federal Trade Commission announced on Monday.

The Center for Public Integrity previously identified Countrywide as the biggest U.S. subprime lender in an analysis of mortgage data published one year ago. The lender, which was acquired by Bank of America Corp. in July 2008, was responsible for at least $97 billion in high-interest loans from 2005 to 2007, according to the Center’s investigation.

The FTC settlement involves mortgage servicing contracts, which typically allow lenders like Countrywide to charge homeowners who are in default on their mortgages for services directed at preserving the lender’s financial interest in the properties. These services include lawn cutting, winterizing, and inspections. Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP hired third-party contractors to do much of this work. In “numerous instances,” according to the FTC’s complaint, the subsidiaries marked up the cost of the maintenance by 100 percent or more, and then billed the homeowners for the fraudulent amount.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz in a statement. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

As part of the settlement, Countrywide must also send homeowners in bankruptcy a monthly notice with information about how much the borrower owes – including any fees assessed during the prior month.

In a statement, Bank of America said it was “commitment to transparency and fair and responsible customer treatment,” and that it agreed to the settlement to avoid the expense and distraction associated with litigating the case.

The FTC said that the $108 million settlement is the largest ever in a mortgage servicing case, after a $40 million settlement with Fairbanks Capital in 2003 and a $28 million settlement with Bear Stearns Cos., LLC and its subsidiary, EMC Mortgage Corp. in 2008.

For Countrywide, though, the sum is a relative drop in the bucket. In 2008, Countrywide agreed to pay $8.4 billion to modify home loans as part of a settlement of a predatory lending lawsuit by 11 state attorneys general. In May, Countrywide agreed to pay $624 million to settle a fraudulent lending practices class action lawsuit brought by several state pension funds.

Lucy Morris, the FTC attorney who led the case against Countrywide, told the Center that it evolved out of individual Chapter 13 bankruptcy suits that the U.S. trustee for the Central District of California had brought against Countrywide. Morris said that Monday’s settlement was a two-year undertaking meant to resolve egregious conduct by the mortgage giant. “At every stage of the default process [Countrywide] was marking up the cost to owners,” she said.

Homeowners eligible for a payment will receive notification through the mail, Morris said.

Help support this work

Public Integrity doesn’t have paywalls and doesn’t accept advertising so that our investigative reporting can have the widest possible impact on addressing inequality in the U.S. Our work is possible thanks to support from people like you.

Bank of America, N.A. has been hit with a proposed class action lawsuit over a host of alleged policies and actions a North Carolina consumer claims have harmed mortgage loan borrowers nationwide.

The plaintiff alleges Bank of America created and opened in late 2019 an escrow account for her mortgage without consent or authorization to do so. According to the lawsuit, Bank of America employs an intentional “hair-trigger” approach to opening escrow accounts given the instruments are profitable to the bank.

More broadly, the sweeping 50-page lawsuit says Bank of America enrolls customers in profitable add-on financial products and new accounts without consent, including opening add-on escrow or impound accounts for ongoing mortgage servicing while providing no opportunity for consumers to agree to the purchase via informed written consent. Additionally, Bank of America employs a policy against promptly playing back call recordings or providing copies of those recordings to consumers who appear on the calls, even if the playback would resolve a dispute, the plaintiff says.

The lawsuit further alleges Bank of America wields a policy of paying property insurance premiums to third-party insurers for customers under mortgage escrow accounts without performing proper due diligence to learn whether money should be paid, which serves to “create a barrier” for a consumer looking to cancel the escrow.

Lastly, the suit alleges Bank of America utilizes a customer service call center system that “walls-off” different departments, which limits internal information access to front-line customer service reps. The complaint says this policy causes “long hold times, and unilaterally ends calls,” to disincentivize customers looking to make choices or take actions that may benefit them yet be detrimental to the bank’s profits.

According to the lawsuit, Bank of America improperly added an escrow account to the plaintiff’s mortgage, with the lender keeping the interest on the account. In the plaintiff’s case, the improper escrow account added by the defendant nearly doubled the woman’s mortgage payment, the suit says. The complaint stresses the plaintiff affirmatively consented to waive escrow when she closed on her Florida condominium in March 2013.

The plaintiff claims that when she called Bank of America in November 2019 to inquire about what an escrow account would cost, she informed the defendant that she’d already paid all of her property insurance premiums for the year. From there, Bank of America went on to not only open an unauthorized account but create a negative balance for the plaintiff by paying more than $1,400 to her property insurer, the lawsuit says.

“No federal bank law preempts [the plaintiff’s] claim, as a matter of state contract law, that BofA was not entitled to open a mortgage escrow account for her unless she first agreed to it, which, here, she did not, and where she had made her property insurance and tax payments,” the lawsuit contends.

The plaintiff charges that her experience with Bank of America’s customer service and call center systems are proof enough of the uniform policies employed by the bank that incentivize the “hair-trigger” creation of escrow accounts and subsequent negative balances associated with those accounts. Per the suit, the defendant insists the plaintiff agreed to an escrow via a single phone call that Bank of America “will not produce—a contract it will not let her see.” From the suit:

“When [the plaintiff] in January 2020 realized that BofA had improperly created an escrow account, she began calling and writing BofA asking for the account to be closed and the improper transaction revoked. BofA refused to acknowledge an error. Rather, BofA took the position that she had verbally contracted to the creation of the escrow account in her phone call on November 13, 2019. However, when she denied making such an agreement by phone, and asked to have the call recording played back to prove it, BofA refused to let her listen to a playback of that phone call, which it admitted it had recorded, and refused to provide her with a copy of that recording.”

Meanwhile, the complaint says, Bank of America has refused to remove the escrow while the plaintiff is subjected to up to three-hour-long phone calls consisting in large part of time spent on hold. On more than one occasion, the plaintiff’s calls with Bank of America ended with the woman being placed on hold again in order to be transferred to a separate “back office” “escrow department,” according to the case. In these instances, the plaintiff was hung up on, and not transferred to another department, the suit says.

Noted in the complaint is what the plaintiff calls Bank of America’s “history of significant large-cohort problems and abuses” across its general consumer lending sector and mortgage servicing sector. Most recently, the Consumer Financial Protection Bureau (CFPB) issued in March 2019 a civil investigative demand to Bank of America as part of an inquiry into unauthorized accounts opened by depository institutions. Despite Bank of America’s reported resistance to turning over emails and other records, the CFPB’s investigation is ongoing, the lawsuit says.

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s newsletter here.

What did Bank of America do wrong?

Bank of America unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived.

What is Bank of America doing?

Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world.

What bank is associated with Bank of America?

Bank of America Corporation affiliates include all entities that utilize the Bank of America, Banc of America, Bank of America Private Bank, Balboa and Merrill Lynch brand names.

Is Bank of America same as Bank of America NA?

While NationsBank was the nominal survivor, the merged bank took the better-known name of Bank of America. Hence, the holding company was renamed Bank of America Corporation, while NationsBank, N.A. merged with Bank of America NT&SA to form Bank of America, N.A. as the remaining legal bank entity.