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Robo-Signing Claims could be Trouble for Bank of America in Litigation

Bank of America could be far from clear of securities claims over the robo-signing scandal under a ruling allowing a mortgage-backed securities investor to press allegations over suspect mortgage documents. A U.S. District Judge in Los Angeles refused to dismiss federal and state securities claims; alleging BofA and its Countrywide unit failed to properly assign loans and deliver their files to MBS trusts. The decision marks a rare bright spot for investors in the mortgage-backed securities multidistrict litigation.

The plaintiffs claimed Countrywide, during the mortgage boom, failed to comply with laws governing the assignment of mortgages and the transfer of loan files; losing much of the paperwork and engaging in a cover-up by filing false documentation in court to foreclose on properties. The judge refused to dismiss these claims. They found that, unlike previous allegations the court has considered, these claims do not address the risk that an underlying loan will default but rather the consequences when a loan defaults.

The ruling could invite other investors to bring similar claims. That is since they presumably would fall within a conservative two-year statute of limitations. The judge concluded that an investor would not have become aware of the damages portion of the plaintiff’s claim. That is until it became clear that title transfer problems were widespread and preventing foreclosures. Those problems weren’t well known until the fall of 2010 when the robo-signing scandal became headline news. That means investors still have a few more months to amend their complaints. Or, file potentially major new suits to pursue claims within the two-year window.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

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