Bank of America is seeking the dismissal of a federal lawsuit that accuses it of heading up a scheme involving home mortgage modifications.
This week, the Charlotte-based bank submitted its reply to the lawsuit, which was filed in July in Colorado, where co-defendant Urban Lending Solutions has operations. The suit accuses the bank and Urban of participating in a racketeering operation that wrongfully denied borrowers seeking modifications under the federal Home Affordable Modification Program.
According to the suit, Bank of America and Urban violated the federal Racketeer Influenced and Corrupt Organizations Act by operating “an association-in-fact enterprise designed to mislead and deceive borrowers through use of the United States mail and wires.” Urban is a contractor to whom the bank sent HAMP work. Bank of America, the lawsuit says, “acted as the kingpin of that enterprise.”
RICO was passed in 1970. At the time, Congress was aiming to target organized crime, which was influencing businesses and labor unions, according to the Justice Department.
Bank of America, in its reply, says the RICO claim is flawed on a technical level. The bank says a RICO enterprise cannot be made of only the defendants in a case.
“Plaintiffs have attempted to evade this requirement by accusing defendants of forming an enterprise with their own employees,” the bank says. “The complaint fails to describe an enterprise distinct from the defendant corporation.”
The lawsuit also fails to “allege specific facts,” the bank said, adding that the RICO claims are “hollow.”
Urban, in its response to the Colorado lawsuit, says the suit fails to show Urban was involved in a RICO enterprise. The company also says the lawsuit does not “specifically allege any wrongdoing” by Urban.
“Through their baseless allegations, plaintiffs impugn the sterling reputation of Urban Lending, one of the fastest-growing minority-owned companies in the United States and the nation’s leading minority-owned mortgage solutions provider,” Urban says.
Bank of America and Urban filed their responses Monday.
Other HAMP litigation
The Colorado lawsuit is not the only HAMP-related case the bank is battling.
In a federal lawsuit filed in Massachusetts, the bank is accused of wrongly denying HAMP modifications and creating delays for borrowers. Earlier this month, a federal judge rejected a class-action request for that lawsuit. Attorneys for borrowers said they will appeal.
The Massachusetts lawsuit, which dates to 2010, garnered renewed media attention when former Bank of America employees, including at least one who worked in Charlotte, filed statements in June claiming the bank used cash and gift cards to motivate them to delay or reject modification requests.
The Charlotte worker, William Wilson, said the bank would deny HAMP modifications and then offer borrowers an in-house modification at a 5 percent interest rate, higher than the 2 percent HAMP rate.
The bank has denied the workers’ assertions and said most of the former employees had minimal involvement with the HAMP program.
The Colorado lawsuit, which mentions the former employees’ statements, was filed by one of the law firms involved in the Massachusetts case. Attorneys are seeking class-action status for the Colorado case.
HAMP was designed after the collapse of the housing market to lower mortgage payments for struggling borrowers. Mortgage servicers, such as banks, are eligible for incentives if they permanently modify a mortgage.
Roberts: 704-358-5248; Twitter: @DeonERoberts
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