Arizona Attorney General Terry Goddard filed a lawsuit against Bank of America Corp. Friday, claiming the country's largest mortgage servicer's handling of loan modifications constitutes consumer fraud.
The suit, filed in Maricopa County Superior Court, also alleges that the Charlotte bank has violated a consent judgment entered into in 2009 between the state and Countrywide Financial Corp., which Bank of America bought in 2008. Following an investigation into Countrywide's origination and mortgage marketing practices, Countrywide agreed to develop a loan modification program for borrowers in Arizona.
"Instead of providing the relief to which eligible homeowners were entitled, Bank of America has failed to make timely decisions on modification requests and proceeded with foreclosures while modification requests were pending in violation of the agreement," a press release announcing the suit said. The lawsuit comes after a year-long investigation into the bank's mortgage servicing practices.
In a statement, Bank of America said it is "disappointed that the suit was filed in Attorney General Goddard's last days in office, particularly because we and other major servicers are currently engaged in discussions led by Attorney General [Tom Miller] in Iowa to try to address foreclosure related issues more comprehensively. In addition to our own, ongoing program improvements we have committed to, we believe that is the approach that will best serve Arizonans who need assistance."
All 50 state attorneys general, as well as 39 state bank regulators, joined forces in October to investigate whether servicers improperly submitted affidavits or other documents in the foreclosure process after several major servicers instigated voluntary foreclosure moratoriums to review paperwork. Miller is leading that investigation.
Goddard isn't the first AG to file fraud charges against a major servicer. In October, Ohio's attorney general Richard Cordray filed civil fraud charges against GMAC Mortgage and its parent company Ally Financial, saying the company misled courts by filing fraudulent affidavits in foreclosure cases. Cordray lost his re-election bid in November and has since been appointed to lead the Consumer Financial Protection Bureau's enforcement division.