NEVADA AG MASTO PLANTS A STICK OF DYNAMITE UNDER THE PRIOR BANK OF AMERICA SETTLEMENT-LOANS WERE...

8/4/2019 NEVADA AG MASTO PLANTS A STICK OF DYNAMITE UNDER THE PRIOR BANK OF AMERICA SETTLEMENT-LOANS WERE

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Case 3:11-cv-00135-RCJ -RAM Document 63-1 Filed 08/30/11 Page 1 of 48


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Nevada AG Catherine Cortez Masto Destroys BofA in New Lawsuit

By: David Dayen Wednesday August 31, 2011 6:10 am

Nevada Attorney General Catherine Cortez Mastos amended complaint in alawsuit against Bank of America has so many interesting nuances, I think Ineed a new Internet to catalog them all. But let me start by saying that thiscomplaint is a stick of dynamite to the foreclosure fraud settlement,exposing it as a useless whitewash that wont deter banks from theircriminal practices. Masto joins other skeptical AGs here in not acceding tosuch a dereliction of duty, and instead she lays out a thorough case ofsystematic fraud, in this case by Bank of America, at every step of themortgage process.First, the background. In October 2008, a group of twelve state AttorneysGeneral, including Nevada, entered into a settlement with Bank of America

over predatory lending at the mortgage lender Countrywide, which BofA hadpurchased in July. In the settlement, BofA promised to modify up to 400,000mortgages nationwide, at a cost of up to $8.4 billion. This was to includeprincipal reductions as well as refinancing, and all foreclosure operations onthe affected loans would be suspended.If any of this sounds familiar, thats because its the same basic structure forthe proposed settlement between all 50 AGs and leading banks over theirfraudulent foreclosure operations. The question looming over the entireenterprise was whether the states could ensure vigorous enforcement.Theres a model with this Countrywide settlement in 2008 that we can look

to. And apparently no AG but Catherine Cortez Masto has actuallyinvestigated whether or not BofA kept their promises. Turns out theyhavent. So Masto is seeking a pullout from the settlement, to pursueprosecution against the bank for multiple deceptive practices.Allow me to highlight the deceptive practices in question. This is going to bea somewhat long excerpt because I want to add as much detail as possible:In her filing, Ms. Masto contends that Bank of America raised interest

rates on troubled borrowers when modifying their loans even thoughthe bank had promised in the settlement to lower them. The bank also

failed to provide loan modifications to qualified homeowners asrequired under the deal, improperly proceeded with foreclosures

even as borrowers modification requests were pending and failed tomeet the settlements 60-day requirement on granting new loan

terms, instead allowing months and in some cases more than a year to goby with no resolution, the filing says [...]The complaint says the bankadvised credit reporting agencies thatconsumers were in default when they were not, and contends that

Bank of America employees deceived borrowers about why their


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requests to modify loans were denied. In addition, it says, the bank

falsely claimed that the actual owners of loans had refused to allowchanges to their mortgages, and it incorrectly claimed that

borrowers had failed to make payments on trial loan modificationswhen in fact they had. Bank of America also misled borrowers, the Nevada

attorney generals filing noted, byoffering loan modifications with oneset of terms only to come back with a substantially different deal.Among the more troubling findings in the Nevada complaint is the contentionby several Bank of America employees that the companyimposed strict

limits on the amount of time they could spend on the phone assistingtroubled borrowers seeking help with their loans.One worker said in a deposition cited in the complaint thatemployeeswere punished if they spent more than seven minutes or 10 minutes

with a customer. Even though these limits allowed almost no time forassistance, Bank of America employees who did not curtail their

conversations were reprimanded, this employee said.This is a portrait of a criminal enterprise, and to anyone who thinks the othermortgage servicers are somehow more chaste than Bank of America, I havesome Bank of America stock to sell you.But Masto didnt stop there. She also pulled out a bazooka. Sheaccused BofA of failure to properly securitize mortgages, breakingthe chain of title and nullifying their standing to foreclose. This is

from the amended complaint:Bank of America misrepresented, both in communications withNevada consumers and in documents they recorded and filed, thatthey had authority to foreclose upon consumers homes as servicer

for the trusts that held these mortgages. Defendants knew (andwere on notice) that they had never properly transferred [text

redacted] these mortgage to those trusts, failing to deliver properlyendorsed or assigned mortgage notes as required by the relevant

legal contracts and state law. Because the trusts never became

holders of these mortgages, Defendants lacked authority to collector foreclose on their behalf and never should have represented they

could.We know that Countrywide didnt convey the mortgage notes properly to thetrust, their own officials testified to that in Countrywide v. Kemp (which is

quoted in the complaint). Masto joins Eric Schneiderman in blowing thewhistle on this corrupt securitization enterprise.The entire complaint is here. (Ive attached it...Chas) Masto is seeking civilpenalties of $5,000 per violation in the complaint, upping that to $12,000when the violation affected a elderly or disabled person. She also wantsrestitution costs for wrongful foreclosures and the costs incurred bymunicipalities and homeowners from unnecessarily vacant foreclosedproperties. Given that Nevada has so many foreclosures, the total liability


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could range higher than the original $8.4 billion settlement, and thats justfor Nevada alone.So much else to say here. Mastos lawsuit is as much about the currentsettlement talks as it is about the 2008 Countrywide settlement. She issaying, in no uncertain terms, that you simply cannot trust the banks to

actually abide by settlement terms. As Masto says in the complaint, Bank ofAmericas misconduct cut across virtually every aspect of the Defendantsoperations, and they materially and almost immediatelyviolated theConsent Judgment agreed upon in the settlement. At the time, Jerry Brown,then Attorney General of California, said that the settlement would beclosely monitored and enforced in the months ahead. It clearly wasnt. BofAdidnt wait for the ink to dry before violating the terms. And Masto has notonly the accounts of borrowers to back this up, but also testimony fromBank of America employees.Knowing this, seeing it fully documented in Nevada, how could there still beany negotiations on a settlement with the same people? The negotiationshould be about whether there will be a public or private perp walk for BofAexecutives.So why hasnt any other state done the same basic investigation as Nevada,and sought to pull out of the Countrywide settlement? Arizona actuallyjoined this lawsuit back in 2010, but that was when Democrat Terry Goddardwas the AG. Republican Tom Horne became the AG after the 2010 elections,and hes too busy literally trying to overturn the Voting Rights Act to worryabout whether or not his constituents are being systematically ripped off bya bank, I guess. (Horne, by the way, is still on the executive committee ofthe foreclosure fraud settlement, I assume because he doesnt want to do an

investigation, and thats the prerequisite, it seems.)As for the others, let me tell you who one of the leaders on the Countrywidesettlement was: a guy named Tom Miller, the Attorney General of Iowa andthe leader of the 50-state settlement talks on foreclosure fraud. Heres whathe said at the time.Miller said the Countrywide agreements program of loan modifications to

prevent foreclosures is a win for all parties. Foreclosure is the enemy. Most

important, loan modifications can help homeowners avoid foreclosures andkeep their homes. Avoiding foreclosures also helps the companies, helps

communities and neighborhoods, and helps our overall economy by

stabilizing the housing market, he said.This is what we have been looking for. This agreement provides for the kindof systematic and streamlined loan modification program that is critical right

now, Miller said. I strongly urge other servicers to undertake similaraggressive programs to prevent foreclosures.Do you think Tom Miller, who wants a foreclosure fraud settlement in theworst way, is going to bother to check to see if BofA managed to actuallygive Iowans the loan modifications they promised? Of course not. And hes


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likely to bully all the other states in the Countrywide agreement to shut upabout how that settlement was basically unenforced, because people wouldget the message that this new settlement would go the same way.He must have got to all of them, but not Masto. And she has ruined his bestwishes, not to mention the best wishes of Bank of America. They are

denying any wrongdoing and still claiming that the best way to get thehousing market going again in every state is a global settlement thataddresses these issues fairly, comprehensively and with finality. Bullshit.The best way to restore the housing market, the rule of law, and

faith in the American system is by rounding up criminal enterprisesmasquerading as banks.And the investigation that would lead to that will surely happen now. Masto,Schneiderman and colleagues like Beau Biden, Martha Coakley and anyoneelse who actually takes their job description seriously will ensure that.

NEVADA AG MASTO PLANTS A STICK OF DYNAMITE UNDER THE PRIOR BANK OF AMERICA SETTLEMENT-LOANS WERE...

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