Bank of America Defrauded Homeowners About Tax Benefits of Mortgages, Says Lawsuit Filed by MIFSP

On July 15, 2011, the Mortgage Institute For Financial Services Professionals (MIFSP) filed suit in U.S. Federal District Court alleging unfair and deceptive business practices against Bank of America (BOA). The lawsuit claims that in promoting mortgages, BOA defrauded consumers about the tax benefits of having a mortgage as documented in “The Red Report, When Banks Don’t Compete”, a study testing mortgage calculators made available to consumers on and through websites of hundreds of banks. “The faulty calculator on Bank of America’s website that consumers used to determine mortgage related tax savings, such as in comparing the rent versus buy option, significantly overstated and grossly misrepresented tax savings from the mortgage interest deduction, thus luring consumers into applying for and obtaining mortgages that may not have been in their financial best interest. Someone making a home mortgage decision using these calculators, and counting on that calculated tax benefit to make homeownership affordable, was misled from the outset,” say Leon Morris, Executive Director of MIFSP.

The multi-count suit alleges Bank of America’s actions were intentional because the bank touted the success of the calculators in converting consumers into “interested and motivated” mortgage applicants. “It’s sad that millions of homes have been lost to foreclosure some due to consumers making unsuitable mortgage decisions by relying, at least in part, on calculators that spewed highly inaccurate, misleading and biased information, and thereby believing the tax savings from having a mortgage would be far greater than it actually was. The amount of damages sought is to bring attention to the need for financial education and to the harm that results when consumers can’t distinguish between financial services professionals who provide objective, fair and balanced housing, tax and/or financial advice and those who pretend to. Bank of America is just one of the banks most likely profiting from exploiting the distorted view of housing affordability and suitability these faulty mortgage calculators were used to create. There are hundreds of others and they should all be held accountable,” says Morris.

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