Fifth Third Bank now joins Bank of America in the courtroom – both have, as of Friday, been hit with putative class action lawsuits claiming they gained millions of dollars in illegal referrals and kickbacks from private mortgage insurers.
The almost-identical suits have been filed in Pennsylvania federal court by the same law firms. In each case, the lenders are being accused on violating the Real Estate Settlement Procedures Act (RESPA,) reducing competition and boosting homeowner’s premiums.
From 2004 to 2011, BofA and Fifth Third Bank brought in millions of dollars in purported premiums but only paid out a fraction in claims. Fifth Third Bank received $54 mil in supposed premiums but paid less than $5 mil out in claims, while BofA got $285 mil and paid out around $59 mil. This helped the banks reduce their own risk while leaving insurers taking on almost all of the risk themselves.
Along with BofA and Fifth Third Bank, other defendants named are six private insurance companies, including United Guaranty Residential Insurance Co. and PMI Mortgage Insurance Co. BofA additionally named Triad Guranty Insurance Corp. as a seventh insurer.
It seems BofA and Third Fifth Bank are just following in the footsteps of HSBC USA Inc., which faces the same sort of suit, filed March 12. Finally, those greedy companies may finally have to pay up for what their actions have caused the people, the housing market and the economy.
Do you think the banks have a chance at winning the suits?