TAMPA — A federal judge has ruled in 20 complaints involving allegations of fraud against Bank of America over its loan-modification program.
Judge Steven Merryday on Feb. 1 granted in part and denied in part motions to dismiss against the lender for alleged faulty actions between 2009 and 2012 in its Home Affordable Modification Program. Along with Edelso Carmenates and Irania
Llagoa v. Bank of America, opinions in 19 other identical complaints were issued the same day in the same court by the same judge.
After hundreds of mortgagors filed suit, the Judicial Panel on Multidistrict Litigation unified all the complaints in Bank of America Home Affordable Modification Program (HAMP) in 2010. That was followed a year later by United States ex rel. Gregory Mackler v. Bank of America, N.A, when a Realtor filed suit against the lender claiming faulty loan-modification dealings; however, “the United States intervened and voluntarily dismissed the action because of a settlement with Bank of America,” according to the opinion.
Six years later, in 2017, more than 70 plaintiffs filed complaints in the Middle District of Florida against Bank of America alleging common law fraud.
“Although differing in minor respects, the complaint — which copy swaths from the qui tam complaint — appear materially identical,” according to the opinion.
Each complaint claims four falsifications by the lender between 2009 and 2012, including failing to inform a danger of defaulting, not providing the mortgage-holder with necessary documents to adjust payments, leading the mortgagor to believe they were approved for modification and for implementing a “fraudulent” inspection fee, according to the opinion.
However, Bank of America moved to dismiss all claims in each complaint, arguing the “banking statute of frauds” four-year limitation was exhausted.
“Because the complaints appear materially identical and because the motions assert the same arguments, this order resolves the motion to dismiss in each action,” Judge Merryday writes in the order before beginning his discussion.
Citing La Grasta v. First Union Secs. Inc. that “a claim warrants dismissal only if the expiration of the limitation is ‘apparent from the face of the complaint,'” according to the opinion.
However, Merryday wrote that “‘Supplemental Directive’ in notifying the plaintiffs about Bank of America’s alleged misrepresentation and consequently triggering the applicable limitation,” according to the order. Merryday wrote that the complicated jargon of the directive and that it was the Bank of America’s responsibility as instructed by the Treasury Department, to assure mortgagors understand the legal document.
“In sum, the ‘Supplemental Directive fails at this time for several reasons to establish the expiration of the fraud limitation,” Judge Merryday writes in the order. Along with time, “Bank of America argues that ‘other borrowers managed to’ sue Bank of America several years ago and that the plaintiffs ‘could have done likewise,’” Merryday wrote in the order.
Though Merryday seems to find favor with the plaintiffs in the beginning of his discussion, his opinion turns towards the end of the order, citing Lance v. Wade to describe fraud finding facts.
“To state a claim for fraud, a plaintiff must plead facts sufficient to show that the defendant knowingly misrepresented or omitted a material fact, that the defendant intended the plaintiff’s reliance on the misstatement or omission, that the plaintiff reasonably relied on the misstatement or omission, and that the plaintiff suffered consequent harm,” Merryday wrote in the order. “Except for the foreseeable-default claim, which satisfies Rule 9(b), the complaints fail to plead with particularity facts that substantiate the fraud claims.”
Merryday concluded the complaint explaining his reason for his ruling.
“Each motion to dismiss is GRANTED-IN-PART and DENIED-IN-PART,” Merryday wrote in the order. “Section 687.0304 bars each oral-approval claim. Also, each document claim violates Rule 9(b)’s particularity requirement, and each inspection-fee claim violates both Rules 8(a) and 9(b). Each plaintiff states a claim based on Bank of America’s omitting to inform the plaintiff that a reasonably foreseeable likelihood of default qualifies a mortgagor for a modification.”