Photo: flickr/Sam Beebe, Ecotrust
Fifteen consumers claim Bank of America helped a developer lead them and hundreds of others to buy $90 million worth of unfinished lots in what was supposed to be a luxury North Carolina subdivision, according to lawsuits filed in North Carolina.Plaintiff Robert Nagel says property developer LR Buffalo Creek — which is not named as a defendant — sold 435 lots to buyers and went bankrupt in 2008 before any construction began. The owners were allegedly left without the “roads, utilities, infrastructure, and amenities” they were promised, according to the complaint obtained by Courthouse News.
More than 200 of the properties on the troubled development were financed by the bank, which Nagel claims “aided and abetted” the developer by giving “substantial assistance or encouragement” in their business. He also claims that:
“The Bank was aware that the developers of Grey Rock were using very aggressive sales tactics with elaborate launch events that included helicopter rides, boat rides, formal dinners and sale boards that were used to create demand for lots and resulted in sales of between 50-100 lots in a day. The Bank participated in these launch events by setting up booths in tents alongside the Developers to meet with prospective purchasers of lots in Grey Rock.”
The suit goes on to accuse the bank of a host of risky lending practices, including inflating lot appraisals and distributing loans with “loan-to-value ratios of between 90% and 95% of the value of each lot.”
Bank of America spokesperson Shirley Norton told Business Insider Wednesday that “the lawsuit is without merit and we will vigorously defend against the allegations.”
This past year Bank of America paid a record $335 million to settle claims that it sold minority borrowers more expensive loans than other borrowers during the peak of the housing crisis. It was also among five major mortgage lenders who agreed to a $25 billion settlement in last year’s joint state and federal investigation into the robosigning scandal.
Whether or not these latest suits pass muster in court, the Consumer Financial Protection Bureau has issued new rules it hopes will prevent predatory mortgage lending. New amendments to the Truth In Lending Act went into effect Wednesday that would require lenders to give home loan applicants copies of written appraisals and other home value estimates before they close on a new property.