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White Sulphur Springs, Montana

Abraham and Betty Morrow have never met Sunil Kumar, of Hyderabad, India, but he is a key figure in their fraud lawsuit against Bank of America.

The lawsuit, alleging that the bank deliberately led them into foreclosure on their retirement home outside White Sulphur Springs, Montana had previously been dismissed by a district court judge. The Montana Supreme Court voted 4-2 on May 7 to overturn that decision, saying the Morrows’ lawsuit should proceed to trial.

John Heenan of Billings, one of the attorneys for the Morrows, said the case could have repercussions for hundreds of Montanans in similar circumstances, and potentially thousands of people all over the country.

“It’s a big deal, and that decision’s a big deal,” he said of the high court ruling.

Heenan said a key factor in the case is that Abraham Morrow is a retired accountant and small-business owner who kept meticulous notes of every conversation he had with Bank of America representatives.

One early conversation took place on Dec. 8, 2009. It was with a Bank of America representative who identified himself as “Brian.” Morrow said “Brian” told him that he and his wife were locked in for a loan modification program. If they successfully made reduced trial payments for three to four months, Morrow said he was told, their loan modification would be made permanent.

After the whole thing unraveled and the Morrows filed suit, one of the defenses made by Bank of America was that, according to its records, Morrow had not spoken with anyone by the name of Brian on the date in question. On Dec. 8, 2009, the bank said, Morrow spoke with a customer service representative in India by the name of Sunil Kumar.

Heenan later deposed Kumar by telephone. Heenan said Kumar told him, “We all use American names” when speaking with customers.

And what American name did Kumar use? “Brian,” he told Heenan.

If Morrow’s custom of taking good notes proved vital, Heenan said, it also illustrated how devious loan-servicing fraud can be.

“If people like that can be tricked, imagine everyone else,” he said.

Even more insidious, Heenan said, is that Bank of America was offering loan modifications under the Home Affordable Modification Program, or HAMP, for which it received federal bailout money designed to help keep people in their homes.

“They turned this HAMP program into a swindlers’ paradise,” Heenan said.

The Morrows’ other attorney is David K.W. Nelson of Helena. The attorneys for Bank of America, Kenneth Lay and Christopher Oliveira, also of Helena, did not respond to requests for comment.

Falling in love with Montana

The Morrows are from South Carolina and first saw Montana on a cross-country motorcycle trip in 1995. They went across the northern part of the state on the way west, then traveled through southern Montana on their way back home.

When they began to think of retiring — they owned two successful sign businesses — their first choice was Montana. Myrtle Beach, S.C., where they lived, used to be a nice place, Morrow said, but over the years it changed from a quiet tourist town to “a year-round metropolis.”

They picked the site of their retirement home in 2003 — 50 acres in the foothills of the Big Belt Mountains about 15 miles southwest of White Sulphur Springs. Their house sits on a hill with million-dollar views in every direction. In addition to the Big Belts, you can see the Crazy, Bridger and Castle mountains from their land.

Abraham Morrow built their 5,000-square-foot house himself, most of it in 2006-07, and then an addition in 2008. Morrow said their house and property were appraised at $491,000, but because he built the house himself, their financing through Quicken Loans totaled $291,200. They had a 15-year term, with monthly payments of $2,301.

Their trouble started in 2009, when the man who bought their businesses in South Carolina defaulted on his payments. Morrow said the new owner basically took a $1 million business and reduced its value to $150,000 in a few years.

They would have walked away from the businesses, Morrow said, but they still owned the building the businesses were in. So, they went back to South Carolina in 2009 and spent most of their time there, running the businesses while looking for a new buyer, until May 2012.

They lived in their RV for a time and later in a house, to cut expenses, but they still called Montana home. Betty Morrow said the only thing they removed from their house near White Sulphur Springs was their clothes.

“This was our home,” she said. “All our possessions were here.”

They returned to Montana full-time in May 2012 and finally sold their businesses in 2013.

Enter Bank of America

Meanwhile, their home loan had been sold to Countrywide Home Loans Servicing. Bank of America later swallowed Countrywide and BAC Home Loans Servicing in a merger. That’s why all three companies were named in the Morrows’ lawsuit.

Because their retirement income was jeopardized by the business default in South Carolina, the Morrows first spoke with Bank of America about modifying their loan in May 2009. Abraham Morrow said they had never missed or been late on a payment to that point.

In October 2009, Morrow said, a Bank of America employee told them that to become eligible for a loan modification, they should intentionally miss the next month’s payment.

Their next conversation was with Kumar, a.k.a. Brian, who told them their new monthly payments would be $1,240, which would become permanent if they made payments for three to four months.

Over the next couple of years, according to the Morrows, they would speak with some 40 different Bank of America representatives by phone, none of whom ever gave their full names. They would give their employee number and first name — whether it was their real first name or not.

Barely two months after they made their first trial payment, the Morrows were informed by a letter from Bank of America that their loan was in default. On March 2, 2010, Abraham Morrow said he spoke with a bank employee who told him to ignore the letter and continue making reduced monthly payments.

The next day, March 3, Bank of America again informed Morrow, by letter, that the loan was in default. On April 22 the Morrows received another letter from the bank, inviting them to apply for participation in the Home Affordable Modification Program.

The letter from Bank of America said that if they qualified for the program they could begin making reduced trial payments. When the letter arrived, the Morrows said, they had already been making the trial payments for three or four months.

In its responses to the Morrows’ lawsuit, Bank of America said its employees would never tell a borrower to intentionally default on a payment. And Kumar, though he testified that he had no specific recollection of his conversations with the Morrows, said he would never tell customers on the phone that they had been approved for a loan modification.

Victory at the Supreme Court

The pattern continued. The Morrows received new notifications of default as well as phone calls from a collection company working for Bank of America. They were also told several times that their documents had been lost or misplaced. Every time they tried to clarify things, Abraham Morrow said, bank representatives would tell them by phone to ignore the letters or collection calls.

In October 2010, the Morrows filed a complaint with Office of the Comptroller of the Currency. In March 2011, a Bank of America employee told the Morrows their loan modification had been denied because they appeared to live in South Carolina, and the Montana home was not their primary residence.

“No one from Bank of America ever told me that” before, Morrow said.

Heenan said the issue of residency was never brought up until the Morrows filed their complaint. At that point, he said, the bank was “trying to cobble together a defense.”

The Morrows filed their lawsuit on May 6, 2011, in the Lewis and Clark County District Court in Helena. Not quite two years later, on April 3, 2013, shortly before the case was supposed to go to trial, a judge granted summary judgment to Bank of America.

The judge said the Morrows could not enforce an oral agreement to modify their loan because it had to be in writing. The judge also ruled that the bank was not negligent because “it was not the Morrows’ financial adviser and owed them no legal duty,” according to the Supreme Court’s synopsis of the case.

The high court reversed the summary judgment on the negligence claim, saying the bank had a duty to process the Morrows’ application promptly “and give them accurate information.”

As for an oral agreement vs. one in writing, the high court ruled that “the rule requiring written contracts in certain cases … exists to prevent fraud and should not be used as a defense by those who have allegedly committed fraud.”

The court also reversed the judgment in regard to the Morrows’ claims that Bank of America violated the Montana Consumer Protection Act. The court said the bank took 10 months to reach a decision on the Morrows’ modification application, instead of the three months that was the standard under HAMP.

The high court said that “these allegations, if proven to be true, represent practices substantially injurious to Montana consumers.”

‘Intentionally dysfunctional’

Heenan has compiled a thick file of affidavits consisting of sworn statements from a variety of former Bank of America employees. Among their allegations is that Bank of America routinely and intentionally delayed action on HAMP applications, falsified records and deliberately supplied customers with confusing, contradictory information.

“Bank of America’s customer-service model is completely dysfunctional,” Heenan said, “intentionally dysfunctional.”

Heenan said banks traditionally lent money to consumers and did all they could to keep them in their homes because they had “skin in the game.” But when banks took to managing loans for investors and had nothing to lose, the traditional relationship was turned on its head.

Also, Heenan said, while the banks received only a tiny portion of monthly mortgage payments, once a foreclosure was set in motion there were all sorts of special fees to be collected by the banks. Foreclosures, Heenan said, turned into “virtual cash cows.”

“In a perverse way, the loan servicers would rather see the homeowner in perpetual default,” he said.

Because the Morrow case apparently is the first one that has been ruled on by a state supreme court, Heenan said, “this is a really big case nationally.”

Thousands of similar cases have been filed around the country, but Heenan said he was told at a national consumer law conference two years ago that no cases had ever gone to trial. Bank of America, with unlimited funds for attorneys, “papers you to death,” he said, and borrowers end up settling for a pittance just to avoid the burden of taking on Goliath.

“How many borrowers can go toe to toe on that?” Heenan said.

Morrow said he never thought of giving in, despite the years of difficulties.

“I am very persistent,” he said.

Betty Morrow said it was as if Bank of America kept beating them down, expecting them to stay down.

“The fact is,” she said, “we got up each time.”

By the Numbers:

The Montana Legal Services Association filed a brief in support of the Morrows when they appealed their case to the Montana Supreme Court. In that brief, the MLSA said it had represented numerous clients “encountering the same wrongful loan servicing acts experienced by the Morrows.”

From June 1, 2012, until the brief was filed, the MSLA said, it had fielded 168 calls regarding loan servicing and foreclosure.

Of those calls, 52 alleged wrongdoing against Bank of America, and eight callers reported that the bank told them to miss payments or stop making payments altogether to qualify for loan modification.

Also, according to the MLSA, 22 callers said they had been forced to resubmit documents repeatedly to Bank of America. Ten of those callers said they had reapplied more than three times — and some as many as 15 times — for loss mitigation assistance from Bank of America.

Ed Kemmick lives in Billings, Montana and edits LastBestNews.com.