Friday, April 12, 2013

Bank of America fails to get kickback suit dismissed

A federal judge has denied Bank of America's request to dismiss a class-action lawsuit that claims it participated in a kickback scheme involving insurance companies.

The case centers on alleged violations of the federal Real Estate Settlement Procedures Act, which requires various disclosures for homebuyers in an effort to protect consumers. RESPA also makes it illegal for anyone to receive fees for services they did not perform in connection with writing loans and the myriad other processes involved in buying a house.

According to the homeowners who filed the suit, Bank of America, which made their loans, colluded with private mortgage insurance companies to funnel kickbacks to a Bank of America subsidiary. According to court documents, the deals involving the Bank of America subsidiary and the private mortgage insurance companies were structured so that the subsidiary, which was supposed to be a reinsurer, assumed little to no risk.

Private mortgage insurance, or PMI, protects lenders in case a homebuyers defaults. Homebuyers who don't make a 20 percent downpayment typically pay PMI.

The lawsuit - filed by Thomas Riddle, Marilyn Fischer and Jeffrey Stanton - names Genworth Mortgage Insurance Corp., Mortgage Guaranty Insurance Corp., Radian Guaranty, Republic Mortgage Insurance Co., Triad Guaranty Insurance Corp. and United Guaranty Residential Insurance Co. as being involved in the alleged scheme with Bank of America and its reinsurance subsidiary.

The defendants sought to have the case dismissed for statute of limitations reasons. Judge Berle Schiller of the Eastern District of Pennsylvania denied the request Thursday.

Reached Friday night, Bank of America spokesman Lawrence Grayson called Schiller's ruling procedural and not based on the merits of the case. "We believe the allegations are without merit, and we will continue to vigorously defend against them," he said.


jay1937 said...

I wonder who told the Judge to deny the request? As I said before, we are on the road to nationalization of the banks, and who knows what will be next.