by Brian Mahany
A federal judge in Manhattan again refused to dismiss a suit brought by a group of investors who purchased stock in the nation’s largest bank, Bank of America. They say the beleaguered lender lied about its foreclosure practices and misled them. They also say that the bank hid billions of dollars worth of debt from its balance sheet by engaging in “dollar rolling.”
The investors claim that after they purchased stock in the bank, a Wall Street Journal article exposed the extent of the dollar rolling. That information caused the stock to plummet 5% in just 1 day. Shortly thereafter, they claim a BOA employee testified before a New Jersey bankruptcy judge that the bank routinely failed to transfer critical loan documents. As that information became public, the bank’s stock dropped even more.
By the time things became so bad with robo-signing and MERS scandals forcing the lender to put a temporary hold on foreclosures, the bank’s stock was just a fraction of what is was a few months prior. The investors claim they lost millions.
The lawsuit was later consolidated with that brought by another group of investors. The second group also sought to name Price Waterhouse Coopers for its audit of the bank as well as many of he banks officers and directors. In July, a federal judge in Manhattan dismissed all the parties except the bank. He ruled that there is sufficient facts to force the bank to stand trial.
According to the court’s opinion, Bank of America knew as early as 2007 that 89% of the loans originated by Countrywide (Bank of America acquired Countrywide) would not meet BOA’s origination standards. Claiming to investors that the bank ensures “consistent production of quality mortgages” could therefore be misleading.
After ruling against Bank of America on July 11th, the bank’s lawyers asked the court to reconsider. Judge William Pauley III denied the bank’s renewed request last week. The investors have just filed an amended complaint meaning yet another motion to dismiss is likely to be filed. If nothing changes, however, Bank of America may soon have to explain itself to a Manhattan jury. In our experience, jurors are not very sympathetic to large lenders.
As this story points out, there were many losers in the mortgage meltdown of 2007. Hard working homeowners are improperly losing their homes because of shoddy foreclosure practices, title insurance rates are increasing because in many cases no one even knows who owns a mortgage or property, investors in bank stock have lost billions (many investors are pension funds), and taxpayers who insured these loans through the FHA, VA or indirectly through Freddie Mac and Fannie Mae are left footing the bill. There are simply no winners.
If you were the victim of a predatory or wrongful foreclosure or HAMP loan modification denial, we may be able to help. We can also help whistleblowers who have knowledge of bank fraud. (Whistleblowers are often entitled to huge cash awards, one quality manager at CitiMortgage was recently awarded $31 million for her information.) For more information, contact attorney Anthony Dietz at or the author directly at (414) 704-6731. All inquiries are kept in total confidence and protected by the attorney -client privilege.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Legal services available in many jurisdictions.