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3/13/15 | BY MIKE DENNISON IR STATE
BUREAU
Lincoln homeowner Pat Freeland told a House committee
Thursday that when Bank of America officials said they were modifying
her mortgage to avoid foreclosure, they lied and that lawmakers
shouldn’t vote for a pair of bills protecting the banks from
liability.
“I’m telling you right now, as long as our
hometown banks are selling these loans to megabanks, we are at risk as
homeowners,” she said. “What we had was not freeflowing
communication with our banker, but free-flowing lies.”
Freeland joined several homeowners and attorneys
testifying against Senate bills 280 and 281, which would narrow the
liability of banks for their lending practices and forbid the award of
punitive damages in consumer protection lawsuits.
They said if the two bills had been in effect, many
Montana homeowners who sued Bank of America and other lenders for
misleading them on the status of their distressed mortgage would have
had no legal claim.
“I believe voting for these bills will take the
voices and power away from common Montanans and protect these banks
from their own fraudulent behavior,” said homeowner Theresa Bybee of
Billings.
Lobbyists for Montana banks, however, argued Thursday
for passage of the bills, which they said are needed to allow local
banks to talk to their customers about redoing problem loans, without
fear of getting sued.
SB280 addresses a 2014 Montana Supreme Court opinion,
which said oral discussions between a bank and its customers are
admissible in court to prove fraud, said the bill’s sponsor, Sen.
Eric Moore, RMiles City.
The bill would change the law to say a suit alleging
contract fraud can be filed against a lender only for a violation
that’s in writing.
Moore said banks need to be able to talk directly with
borrowers about fixing distressed loans, without worried about getting
sued for what they say.
“This is just a commonsense bill,” he told the
House Business and Labor Committee. “In the real world in which we
live in, we get things in writing. This bill is going to protect both
consumers and banks from useless litigation.”
Bank officials and their attorneys said Montana banks
now are being advised not to talk to customers about modifying a loan,
because those conversations could be used in a lawsuit.
“Based on the (court) decision, it is going to be
very difficult for our banks … to negotiate with borrowers who are
in trouble,” said Jim Brown, an attorney representing the Montana
Independent Bankers Association. “This (bill) gives us some
certainty that we won’t be sued for any discussions on modifications
for a loan.”
The House panel took no action Thursday on the bills,
which passed the Senate late last month on mostly partyline votes,
with Republicans in favor.
Attorneys for the banks said the bills sponsored by
Moore don’t take away the right of anyone to sue banks over alleged
fraud in lending activities or affect any ongoing litigation.
But lawyers for the homeowners said if the two bills
had been in place before now, successful lawsuits against Bank of
America or other lenders who misled homeowners would have failed, and
the Supreme Court decision holding them liable for false statements
wouldn’t have happened.
Al Smith, executive director of the Montana Trial
Lawyers Association, said while Montana banks say the bills are aimed
at helping them, the big banks who buy mortgages from local lenders
are the ones who will be protected.
“Montana bankers are doing the right thing,” Smith
said. “The problem with Senate Bill 280 is that it protects not just
the bankers who are doing the right thing; it protects those
bankers who are doing the wrong thing. And that is absolutely the
wrong thing that this Legislature should be doing.”
Freeland and her husband Richard said they spent
several years trying to get a modification of their home mortgage,
after the recession hit their contracting business, but that Bank of
America consistently misled them and eventually foreclosed on their
home.
The Freelands sued Bank of America and settled the
case after the Supreme Court decision, and still have their home. (A
search for this case on the Montana Supreme Court website and
elsewhere found nothing. MSF)
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