Bank of America Faces Borrowers' Suit Over Mortgage Insurance

Bank of America Faces Borrowers' Suit Over Mortgage InsuranceA lawsuit by homeowners against Bank of America and private insurers can proceed over claims that the nation’s second-largest bank took kickbacks from these mortgage insurers, allegedly resulting in inflated prices for consumers, a judge has ruled.
U.S. District Judge Berle Schiller in Philadelphia denied requests for dismissal by the bank and insurers based on the statute of limitations under the Real Estate Settlement Procedures Act, also known as RESPA.
The law, enacted in 1974 and expanded in 2010, requires lenders to provide specific information regarding all costs associated with home loan products.
Three Pennsylvania homeowners sued Bank of America last year alleging that the bank’s reinsurance scheme cost borrowers $284.7 million between 2004 and 2011. Bank of America allegedly collected that amount from private mortgage insurers as its share of premiums for referring borrowers, according to the complaint.
“Ultimately, Plaintiffs (homeowners) contend, borrowers paid more for mortgage insurance because the price included the kickbacks to lenders,” the judge wrote in his opinion Thursday denying motions to dismiss the case.
Homeowners also claim that they were never told that the agreements between the bank and the insurers “failed to transfer risk as required to be legitimate” and that Bank of America and the insurers misrepresented their relationship and failed to disclose which entity would insure their loans, according to the complaint.
In his opinion, the judge said: “Whether these arguments ultimately bear fruit must be decided at a later date. At this stage, however, Plaintiffs’ (homeowners) allegations that Defendants (Bank of America and the insurers) dressed up an illegal scheme to appear as a legitimate transaction is sufficient to deny Defendants’ motion to dismiss …”
The homeowners, who took out mortgages from Bank of America in 2005 and 2007, also named private insurers Radian Guaranty, Genworth Financial’s Genworth Mortgage Insurance Corp., and United Guaranty Residential Insurance, a subsidiary of New York-based American International Group, in their complaint.
“This is a procedural ruling and not a ruling on the merits of the case,” Shirley Norton, a Bank of America spokeswoman, told Bloomberg.  “We believe the allegations are without merit and will continue to defend vigorously against those allegations.”
The homeowners are seeking a class action to represent all borrowers who obtained residential mortgage loans from Bank of America since Jan. 1, 2004.
The Consumer Financial Protection Bureau, which now enforces RESPA, announced April 4 that Radian, Genworth, United and another insurer agreed to pay more than $15 million in penalties to settle claims they paid illegal kickbacks to lenders in exchange for business.
The CFPB said it filed the complaints and the proposed consent orders with the insurers to stop these kickback practices, which have been prevalent for more than 10 years.
The mortgage insurers received lucrative business referrals from lenders in schemes that were common in the years leading up to the financial crisis, the CFPB said.
“Illegal kickbacks distort markets and can inflate the financial burden of homeownership for consumers,” CFPB Director Richard Cordray said in an April 4 statement. “We believe these mortgage insurance companies funneled millions of dollars to mortgage lenders for well over a decade. The orders announced today put an end to these types of arrangements…”

One thought on “Bank of America Faces Borrowers' Suit Over Mortgage Insurance

  • April 23, 2013 at 10:42 am
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    Dan
    April 23, 2013 at 10:11 am
    More CROOKS , I am sure all Banks were doing this, and will continue to do it………
    Hello
    Wells Fargo foreclosed on us, and did not even own the mortgage.
    I hired 3 different firms to try and work something out in the form of a
    Modification, Wells Fargo would not even discuss it.
    Then I ended up hiring 3 differ law firms to help file the Chapter 13
    All of these Firms were so busy raking in Huge profits from all the BK cases, that we could not even get one of them to do due diligence and file the correct papers.
    I spent over 20K on worthless Attorneys, we also filed every complaint under the sun and all of these Government agencies did NOTHING AT ALL, we never even received a reply from any of them.
    After all of this, I choose to become my Own Attorney Pro Se and straighten out the Chapter 13.
    This all took so much time, that even after being laid off in the worst depression on recent record, and being lucky enough to find something temporary 200 miles from home,.
    I also lost the temporary position after a year, as I was being summoned to court and harassed by Wells Fargo every other month.
    I finally negotiated a shotgun at my head modification with Wells Fargo, who refused to ever provide a single shred of any evidence that inflated my Mortgage by over 10,000.00.
    My new payments were higher than before, and this all cost me over 40,000.00 and surely took years off my life due to the stress and hassles.
    Now The FEDs and Bank Crooks want off the hook for a 1,000.00 per person with no disclosure at all.
    America, none of these crooks even went to jail; we were all ripped off BIG TIME.
    I Demand BETTER, and so should the rest of the Americans in this once great country.
    People need to be Jailed, Feds needs shut down.
    This is absolute BS, Call your Senators.

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