New Jersey Class Action vs. Bank of America – Will Suits Spread?

According to an article by Charles Toutant at, Bank of America (BAC) was cited in a New Jersey class action complaint on behalf of mortgagors who have pending foreclosure actions in that state.  Toutant writes in the article:

The suit, filed Wednesday in federal court in Newark, N.J., accuses Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, of “an undisciplined rush to seize homes” through “pervasive and willful disregard of knowledge, facts and statutes.”

Bank of America has filed foreclosure proceedings on many mortgages in New Jersey without holding the necessary rights as the mortgagee or assignee at the time of foreclosure, the suit says.

“Many thousands of foreclosures are plainly void under statute and settled New Jersey case law. Many borrowers never obtain statutorily required notices, and many foreclosure suits are filed entirely based in inaccurate recitations concerning ownership of the mortgage, the note, or the assignment,” the suit says.

The putative class in the suit, Beals v. Bank of America, N.A., 10-cv-05427, consists of all named defendants in pending New Jersey foreclosure actions initiated by Bank of America or its affiliates. The complaint includes counts of common-law fraud, breach of the covenant of good faith and fair dealing and violations of the New Jersey Fair Foreclosure Act and Consumer Fraud Act.

There are seven named plaintiffs in the suit.  Among these are cited a case where foreclosure was filed after a mortgage was modified and reduced payments made, and another where a binding arbitration agreement that ended the foreclosure proceedings was ignored by the bank.

According to Toutant:

The suit was brought by Lawrence Friscia, head of a Newark firm that counsels distressed homeowners, and his associate, Jonathan Minkove, who say they’ve found that Bank of America regularly negotiates binding agreements to modify mortgage terms and then fails to honor the terms.

And further:


“There’s a difference in the fact pattern [among individual cases] but there’s pattern and a practice of blatant disregard for process,” says Minkove. “Any lawyer who’s worth his salt will tell you process matters.”

And when judges call them to case management conferences in their foreclosure cases, outside counsel for Bank of America regularly fail to show up, says Friscia. Worse still, New Jersey’s judges don’t seem to be bothered by such behavior, he says.

“There’s a shocking deference given to Bank of America on the part of the judicial system,” Friscia says.

This is an action in just one state against one mortgage holder, servicer and processor, including two of its subsidiaries (LaSalle Bank and BAC Home Loans Servicing).  If this becomes widespread across many states and many mortgagors, it is easy to visualize hundreds of such cases.  It is not unlikely that the major banks will try to get these cases dismissed, of course, but failing that they will probably want to aggregate as many as possible to reduce legal expenses.  Plaintiffs attorneys will likely argue against that.

They will say something about the cases against different banks and in different jurisdictions have too many dissimilarities to aggregate class actions.

What plaintiff attorneys won’t say is that they prefer to get the higher compensation that would accrue from pursuing the separate cases.  Assuming they are winning the cases, of course.

While the attorneys are getting rich foreclosures will be delayed even more than they have been in the past.  According to Suzanne Kapner and Aline van Duyn  in The Financial Times, Freddie Mac (FMCC.OB) reports that foreclosures have been taking eight months to complete.  This compares to six months before the housing decline started.  The article says Fannie Mae (FNMA.OB) has not reported how long their foreclosures are taking.  Other mortgagors may be taking even longer; I have read that the average time from first deficiency notice to foreclosure completion for all lenders has been well over a year.

These long process times could be getting even longer if class action suits tie up the lenders and courts demand more thorough review of foreclosure documentation, as has occurred in New York in the past week.