Nevada’s attorney general last week expanded her state’s mortgage fraud lawsuit against Bank of America, a move that could have serious consequences for the embattled bank and a potential settlement between national banks and other attorneys general.

 

AG Catherine Cortez Masto originally filed a more modest civil action against BofA over home loan modifications. But the new case has been described by Paul Kiel of ProPublica as a “broadside that targets virtually all aspects of the bank’s mortgage operations.”

 

According to Masto, BofA, and the now-defunct mortgage giant Countrywide acquired by the bank in 2008, deceived borrowers and investors throughout the home-loan process. The lawsuit alleges that “Bank of America’s misconduct in misrepresenting its mortgage modification program continues through the present.” It adds that “According to at least one former employee, Bank of America reprimanded them for spending too much time with individual customers and directed them to limit call times with customers to an average of seven to ten minutes—leaving them almost no time…to correct or update relevant information.”

 

“Taken together and separately, [Bank of America’s] deceptive practices have resulted in an explosion of delinquencies and unauthorized and unnecessary foreclosures in the state of Nevada,” the suit alleges.

 

The new lawsuit may further lower investors’ confidence in BofA, which has seen its stock fall 40% since March.

 

In addition, Masto’s decision could make it tougher for the Obama administration to please Wall Street by reaching a quick settlement in a larger, nationwide case involving BofA and four other large banks over their foreclosure practices.

 

New York’s attorney general, Eric Schneiderman, and other AGs have been reluctant to go along with the administration, because, they say, the deal would handcuff them from going after banks in the future over mortgage-related cases.

-Noel Brinkerhoff

 

Nevada Wallops Bank of America With Sweeping Suit; Nationwide Foreclosure Settlement in Peril (by Paul Kiel, ProPublica)

Nevada Says Bank Broke Mortgage Settlement (by Gretchen Morgenson, New York Times)

Nevada v. Bank of America (pdf)

Obama Administration Fights to Halt Bank Investigations by States (by Noel Brinkerhoff, AllGov)