Bank of America Faces Racketeering Claim Over PMI Policies

A New York customer is accusing Bank of America of multiple violations of federal racketeering laws, among others, in its handling of PMI fees.

Plaintiff Andrea Basli has filed a class action based on her experience as a Bank of America loan customer. She claims the bank deliberately failed to send her a federally required annual disclosure of her right to cancel private mortgage insurance (PMI) on her loan.

As a result, she says, she remained unaware that she was unnecessarily paying for Bank of America PMI long after she was required to keep such coverage.

“This action stems from an unjust scheme undertaken by the Defendant to maximize profit by failing to notify the Plaintiff and Class Members about their option to cancel their PMI when their loan was eligible,” the lawsuit states.

“As a result, the Defendant collected massive amounts of monthly PMI fees that were unearned, fraudulent, illegal, excessive, repetitive, unfair, deceptive, false, and fictitious by charging them to unsuspecting borrowers’ accounts.”

Mortgage lenders generally require borrowers to carry PMI to protect the lender in case of default, with the premium rolled into the monthly mortgage payment.

However, the borrower has the legal option to end that coverage once the outstanding principal balance has been paid down to a certain level.

The lawsuit cites the Homeowners Protection Act of 1998 (HPA), which states that a borrower may opt to cancel PMI when the principal mortgage balance has been paid down to 80% of the secured property’s original value.

In addition, under this law, the lender must terminate PMI automatically when the principal is scheduled to reach 78% of the original value. This law also requires lenders to send annual notices to borrowers to update them on their PMI status.

Basli purchased a home in Putnam County, New York, in September 2009. She obtained the original mortgage from M&T Bank, which transferred the loan to Bank of America about three months later.

The Bank of America PMI disclosure form she signed at the loan closing stated that her principal balance was scheduled to reach the milestone for voluntary cancellation on Oct. 1, 2016, and for automatic termination on Dec. 1, 2017.

“The lender along with the PMI company knew up front that the Plaintiff and Class Members would very rarely remember to request PMI cancellation seven years or so after closing,” the lawsuit maintains. “As such, the HPA was enacted to, inter alia, rectify the policy of lenders failing to notify borrowers that they may cancel their PMI when the subject loans are eligible for cancellation and then continuing to collect unnecessary and additional PMI for many months.”

Indeed, the plaintiff alleges that she never received the legally required annual notices and therefore was unaware of her eligibility status when the time came. She claims she would have triggered the voluntary cancellation if she had received such notice. But, since she didn’t cancel the Bank of America PMI, the lender continued to charge those fees for 14 months until the required termination date.

The filing notes that the PMI provider is always designated by the mortgage lender, so the borrower cannot choose the provider nor negotiate the terms and conditions of coverage.

The plaintiff is claiming that Bank of America “colluded with the PMI company to continue to charge monthly premiums well after the Plaintiff and Class Members had a right to cancel the insurance in order to increase their profits at the expense of unsuspecting borrowers. … Both Defendant and the PMI company profited handsomely from the scheme at the expense of the Plaintiff and the other Class Members.”

Basli maintains that the Bank of America loan practices violate several aspects of the federal Racketeer Influenced and Corrupt Organizations Act (RICO):

• First, she alleges mail and wire fraud were committed in that the bank used mail and email correspondence to bill customers for unnecessary PMI fees — deliberately omitting notices of eligibility to cancel PMI.
• Second, she argues that Bank of America illegally invested “income derived from racketeering activity” into its own activities, which affect interstate and foreign commerce.
• Third, she claims the bank “knowingly, willfully and unlawfully conspired to facilitate” its operations through “a pattern of racketeering activity.”

The lawsuit also cites multiple violations of the Homeowners Protection Act and New York General Business Law, in addition to breach of contract, unjust enrichment and negligence.

Plaintiff is demanding a jury trial in hopes of gaining declaratory relief as well as actual, punitive, compensatory and statutory damages for all potential Class Members, who are estimated to number in the tens of thousands.

She is represented by Rick S. Cowle of The Law Office of Rick S. Cowle PC.

The Bank of America PMI Class Action Lawsuit is Andrea Basli, et al. v. Bank of America NA, Case No. 7:20-cv-04063, in the U.S. District Court for the Southern District of New York.

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