BOA- Another Shoe Drops

Posted by kevin on August 14, 2013 under Foreclosure Blog | Comments are off for this article

Last week, I blogged about the lawsuit against Bank of America pending in Massachusetts. Within a few weeks of that suit, another group of homeowners in Colorado brought a lawsuit in the federal court alleging that BOA and its contractor, Urban Lending Solutions, ran a scheme to deny permanent modifications in contravention of the federal RICO Act.

The RICO Act was initially used to allow federal law enforcement more flexibility in going after organized crime. Over the years, however, its use has been extended to what would be considered business type activities. Moreover, the RICO statute provides for a private right of action (meaning individuals and not just the government can sue under the statute) and allows legal fees to a prevailing plaintiff.

Interestingly enough, the complaint filed in Colorado cites statements made by former BOA employees in the Massachusetts case. It alleges that BOA and Urban Lending Solutions conspired, in some cases, to push borrowers into more expensive “in house” mods rather than HAMP mods. It also alleges that in other cases, BOA advised borrowers to send their financial information to Urban Lending Solutions. Urban became the “black hole” for documents sent by homeowers. Ultimately, the mod applications were denied in a wholesale manner.

BOA and Urban Lending Solutions have denied any culpability. Notwithstanding with 2 federal lawsuits filed in the last two months both alleging widespread fraud in the modification area, regulators and members of Congress are taking notice.

Irrespective of the outcome of these specific cases, it is my opinion that if the courts in Colorado and Massachusetts rule unequivocally that borrowers have standing to sue in HAMP/mod situations, the defense bar (lawyers who represent homeowners) will have a big victory.