Nevada Seeks To Amend Countrywide Settlement

Since filing suit against Bank of America and its subsidiaries, including Countrywide Financial, the state of Nevada says it has found evidence of additional violations regarding mortgage lending practices. The state is asking the court to allow it to amend its original complaint and void the original judgment.

The complaint was filed in response to reports from homeowners about the obstacles they faced when trying to obtain a mortgage modification. The updated complaint lists additional claims relating to mortgage origination and servicing and continues to assert violations of the Consent Judgment entered into between the State of Nevada and Countrywide to resolve Countrywide’s liability for fraudulent mortgage lending, marketing and servicing.

Familiar pattern of complaints

That judgment found that Countrywide failed to provide loan modifications to eligible borrowers, failed to make decisions on loan modifications, on average, within sixty days of receiving requests from homeowners, and initiated foreclosure actions while consumer’s modifications requests were pending.

In addition, the amended complaint contains new allegations that Bank of America violated the Consent Judgment, namely that Bank of America increased consumers’ interest rates and monthly payments, even though the Consent Judgment allows only modifications that decrease consumers’ interest rates, actually leaving consumers worse off.

The amended complaint also asserts that the bank required consumers to provide extensive documentation – including pay stubs, tax returns, and sworn affidavits -- to qualify for modifications, despite the Consent Judgment’s promise of streamlined modifications.

Materially breached the agreement

Based on the original and new violations, the state of Nevada added a new request for relief – that the court find Bank of America to have materially breached the Consent Judgment, allowing the state to terminate the Judgment.

In the filing, the state said it considers the bank's “disregard for their duties under the Consent Judgment so pervasive that they constitute a material breach warranting dissolution of that Judgment.”

After two and a half years of lost implementation – of borrowers denied modifications, discouraged by repeated and futile efforts to obtain help, or already subject to foreclosure – the state says it no longer can get the benefit of its original settlement with Defendants.

Free to bring new charges

Upon terminating the Consent Judgment, the state would be released to pursue its original claims against Countrywide for consumer fraud in originating, marketing and servicing mortgage loans.

In that regard, the complaint alleges that Countrywide failed to disclose and affirmatively misrepresented that loans like its Payment Option Adjustable Rate Mortgages (“Option ARMS’) and Hybrid Adjustable Rate Mortgages (“Hybrid ARMS”) were originated at low teaser raters, in effect only for a short time, and that payment on these loans would increase dramatically – often more than double the original rate – when the teaser period expired or the loans reset or recast.

In addition, the state says Countrywide did not disclose that consumers who made only a minimum payment, based on that low teaser rate, would experience negative amortization, which would cause them to fall deeper in debt. These features, which the state says made the loans unaffordable, created the need for many Nevada customers of Bank of America to seek loan modifications.