The battle is intensifying to hold Bank of America accountable for faulty foreclosures that may have scammed taxpayers out of billions is intensifying on a state level. In a lawsuit filed by the state of Arizona against the nation's largest lender, a federal auditor says that Bank of America "significantly hindered" a review of its foreclosure practices on loans insured by the Federal Housing Administration.
William Nixon, a fraud examiner with the U.S. Department of Housing and Urban Development, accuses the bank of withholding key information and delaying the investigation. In court-submitted document filed in court June 8 but obtained by the press Monday, Nixon says that Bank of America failed to comply with subpoenas, kept his team from reviewing the bank's documents unit, and in one instance, only supplied the watchdog unit with only one third of the records requested. At one point last year, the bank's "reluctance" to comply with requests forced Nixon to request help from the Justice Department. A Bank of America spokesperson denied the allegations.
The lawsuit in Arizona is part of a larger probe into the nation's top five mortgage lenders pursued by a coalition of federal agencies and attorneys general from all 50 states. Lately, however, it seems increasingly apparent that the states are being more aggressive than Obama officials in moving the investigation forward--especially with regard to Bank of America.
In recent weeks, New York Attorney General Eric Schneiderman quietly launched a new probe into the bank's mortgage practices, especially the packaging and sale of loans to investors. According to the Huffington Post's Shahien Nasiripour, this investigation bears serious consequences for Bank of America as well as other top lenders:
The inquiry could prove explosive: Wall Street's great mortgage securitization machine took millions of home loans and bundled them into securities for sale to investors. If the legal steps that guide securitization -- like taking mortgage documents from one party to another, a critical step under New York law -- were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.
As state investigators dig in, the Obama administration are eager to reach a settlement with the five big banks. The latest reports show that the banks are preparing themselves to pay up to $20 billion for the alleged mortgage abuses.