On Friday, two state attorneys general filed a lawsuit against Bank of America accusing the mortgage lender of widespread fraud in the way it has handled borrowers’ requests for loan modifications on their mortgages.

These lawsuits have interesting timing. Attorneys general throughout the country have recently launched a coordinated investigation into the manner that Bank of America and other lenders have managed their foreclosure paperwork. After many cases of erroneous foreclosures, it became known that many lenders were using “robo-signers,” employees who used an automated process for signing hundreds of documents each day, instead of individually reviewing what were supposed to be sworn documents.

In the recent lawsuit, the attorneys general for Arizona and Nevada have accused Bank of America of a long list of actions that violated borrowers’ rights.

They accuse the bank of:

  • Making up sham reasons for denying requests for loan modifications
  • Falsely assuring borrowers that their homes would not be foreclosed upon while they were seeking a loan modification
  • Misleading customers to believe they must be in default on their loans before they could request a loan modification, and
  • Promising to make loan modifications permanent after a trial period, but later back-tracking on the agreement

According to the lawsuits, Bank of America’s actions were not confined to Nevada and Arizona. Rather, the bank’s behavior reflected a “pervasive nationwide pattern and practice of conduct.” The complaints against Bank of America reflect problems all too common with other lenders across the country.

Many homeowners seeking loan modifications are confronted by confusing bank policies, and sometimes misinformation from bank employees. If you are considering a loan modification, an experienced bankruptcy and loan modification attorney can help you understand your legal rights.

Source: The New York Times, “Two States Sue Bank of America Over Mortgages,” Andrew Martin and Michael Powell, December 17, 2010