Vermont will receive $1 million for dropping the legal claim, paying legal expenses and other fees. The office of Attorney General Bill Sorrell will use another $250,000 to repay Vermonters who make similar mortgage foreclosure noncompliance claims in the future.
The cash award is the first major settlement since 2012, when the high-profile mortgage settlement with the federal government and 49 states against the five biggest mortgage companies gave Vermonters $3.1 million and another $3.6 million in payments were made to the state.
Vermont’s state-level case against Bank of America settled this week included many of the same complaints that prompted the national case. Sorrell filed the lawsuit in Washington Superior Court in October 2013. It was more than a year after the federal government and the majority of state governments reached the “national mortgage settlement” for $25 billion.
Sorrell said he and his staff “got Bank of America’s attention” when it alleged in the October 2013 lawsuit that the North Carolina company didn’t comply with state statutes enacted in 2010 regarding how banks must handle foreclosure mediation in Vermont.
The Vermont law, passed in response to the 2008 housing crisis, gave homeowners the right to meet with a representative of the bank that held the home mortgage and a third-party mediator in order to negotiate an agreement that would allow the homeowner to avoid foreclosure and stay in his or her home.
According to the lawsuit, Bank of America failed to comply with settlements it reached with homeowners during mediation, billed the homeowners for more money than those Vermonters originally agreed to pay and mailed information to Vermonters that misrepresented how much money they owed Bank of America.
“There were mediation attempts and agreements reached and for some reason, one way or another, one part of Bank of America didn’t know what other parts of Bank of America were doing,” Sorrel said. “So people were being billed for higher amounts than what was provided in the settlement.
“These sorts of issues were specifically part of the complaints that the states had and the federal government had with Bank of America and others,” he said. “We had this national settlement that they were to reform their procedures, and at the end of the day, they didn’t do what they were supposed to do.”
Sorrell’s case originally focused on two foreclosure cases that involved “repeated breaches” of mediation settlement agreements, according to a news release from 2013. The state sought $10,000 in penalties for each violation of the law, plus legal fees and other expenses.
Sorrell said Vermont is one of the first states to his knowledge to file suit against Bank of America following the landmark national case that settled in 2012.
“I think it’s fair to say that Bank of America was, one, surprised that we filed suit, but, two, surprised that we took as aggressive a stance in resolving it as we did,” he said.
Under the settlement signed this week, $1 million of the settlement will go to settling the case, including paying for attorneys’ fees and the cost of investigating the matter. The office will use the remaining $250,000 to set up a “settlement noncompliance fund” to pay Vermont borrowers who make valid foreclosure noncompliance claims with the state.
“We’re comfortable that with the $250,000 fund we’ll be able to accommodate the Vermonters who were wronged by bank of America, but as far as the exact number [of affected Vermonters], we don’t know,” Sorrell said.
Bank of America must also have “effective policies and procedures” in place to help prevent future settlement noncompliance issues, according to the settlement. A company spokesperson, Rick Simon, released a statement saying those policies were already in place.
“We strongly believe Bank of America’s participation in the Vermont foreclosure mediation process was and continues to be entirely consistent with the spirit and letter of the program,” Bank of America said in a statement. “However, this agreement allows us to put one more legacy mortgage issue behind us without the cost and time of further litigation.
“This settlement resolves isolated servicing issues and provides a mechanism to get assistance to any customers who submit qualifying claims, as well as to Vermont Legal Aid and the Vermont Judiciary,” the statement said.
