Arizona Attorney General Terry Goddard filed a lawsuit against Bank of America Friday morning, alleging that the nation's largest servicer of residential loans committed "widespread consumer fraud" in its handling of loan modifications.
The suit also accused the bank of reneging on a 2009 settlement that ended a probe of alleged fraud in the mortgage operations of Countrywide Financial Corp., now part of the Charlotte megabank. (B of A bought CFC in August 2008.)
In a statement, the bank said, "We are disappointed that the suit was filed in General Goddard's last days in office, particularly because we and other major servicers are currently engaged in discussions led by Attorney General Miller in Iowa to try to address foreclosure related issues more comprehensively."
It added that "In addition to our own, ongoing program improvements we have committed to, we believe that is the approach that will best serve Arizonans who need assistance. The State of Arizona has been an active participant in those discussions, which would benefit Arizona without the cost to its citizens of expensive go-it-alone litigation."
The suit was first reported on by The Wall Street Journal.
Goddard, one of the state attorneys general leading the nationwide investigation of foreclosure practices by lenders and mortgage servicers, alleged in the suit that B of A plowed ahead with foreclosure proceedings on some borrowers despite agreeing as part of the settlement to halt such actions while loan-modification requests are being reviewed.
Some loan modifications have been "in limbo" for more than a year, according to the suit.
