Bank of America settles with New York customers over delays

By Bill Heltzel

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Usually it’s the bank customers who are expected to fork over penalties and fees for various violations of account rules, but now a bank has to compensate a few thousand New Yorkers for paperwork wrongdoing.

U.S. District Court Judge Vincent Briccetti in White Plains approved a settlement in a class-action lawsuit for homeowners who paid off mortgages with Bank of America between July 2010 and November 2015. In many instances, the bank failed to file proof that the mortgages had been paid.

“This is no mere procedural peccadillo,” the original complaint, filed three years ago, said, and property owners were exposed to risk.

The law firm for the homeowners estimated the value of the settlement at $7.8 million.

The New York Real Property Law requires proof to be filed within 30 days when a mortgage is satisfied. If not, the mortgage company is liable to the borrower for $500 after 30 days, $1,000 after 60 days and $1,500 after 90 days.

The paperwork is meant to ensure efficient transfer of property. Title companies, for example, rely on the proof to show that a property title is clear. A homeowner who has paid off a mortgage and then sells the property needs a clear title to complete a sale.

Typically, homeowners assume the bank has filed the paperwork, said Jeremiah Frei-Pearson, whose firm filed the lawsuit. It takes someone with an “eagle eye” to notice the discrepancy.

Milton Adler was such a person, he said.

Adler borrowed $280,749 from BNY Mortgage Co. in 2003 for a condominium in Somers. The mortgage was assigned to Bank of America in 2007.

Adler sold the condo in 2012 and used the proceeds to pay off the loan. The deed of sale was promptly recorded by the Westchester County Clerk but the satisfaction of mortgage was recorded 47 days after the loan was satisfied.

Dereck and Jacqueline Whittenburg experienced an even longer delay. Dereck Whittenburg, as March Madness aficionados know, was the shooting guard on the 1983 North Carolina State basketball team who lofted an errant jumper that was dunked by teammate Lorenzo Charles to upset the University of Houston, 54-52, for the national championship. He coached Fordham men’s basketball for several years and is now associate athletic director at N.C. State.

The Whittenburgs borrowed $422,750 from Fleet National Bank in 2004 for a house in Pelham. Bank of America bought Fleet, and in 2012 the Whittenburgs sold the property and paid off the loan.  Proof of the mortgage satisfaction was recorded 175 days later.

Adler and the Whittenburgs became the lead plaintiffs in a class action lawsuit. Adler died and his son and daughter, Denise Jaffe of Pleasantville and Daniel Adler of Manhattan, agreed to continue the lawsuit in his place.

Lawyers examined more than 5,000 pages of documents and thousands of mortgage filing from four counties, during the discovery phase. They deposed 11 witnesses, including seven from Bank of America.

Last October, after an 11-hour mediation, the parties agreed in principle to settle the case to avoid further costs, delays and litigation.

Judge Briccetti formalized the settlement in July.

Bank of America, based in Charlotte, N.C., denied any wrongdoing. Property owners were eligible for settlements ranging from $180 to $780, depending on how long their mortgage satisfaction papers were delayed. Adler’s daughter and son and the Whittenburgs were awarded $5,000 each for their “time and effort for representing the class.”

Their law firm, Finkelstein, Blankinship, Frei-Pearson & Garber, LP, White Plains, was awarded $1.5 million plus $20,000 in expenses.

Settlement notices were sent to more than 16,000 Bank of America customers. Fewer than 4,500 responded, and checks have been mailed to them in the past few weeks.

The bank was represented by Bryan Cave LLP, Manhattan. Attorney Christine Cesare did not respond to requests for comment.

For a bank that recorded $93 billion in revenue last year, the settlement is a mere blip. But Frei-Pearson hopes it sends a message.

“We hope it incentivizes them,” he said. “We’re very happy to have recovered money for the folks put at risk. And we hope Bank of America will be more careful in the future.”

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About the author

Bill Heltzel
Bill Heltzel has covered criminal justice, courts, government and sports – as a beat reporter and investigative reporter – for daily newspapers in Florida, Indiana, Ohio, and Pennsylvania. He worked for Bloomberg LP in training and sales. He joined The Business Journal in 2016.

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