Some Massachusetts homeowners have received surprise letters — and even lawsuits — after Bank of America accidentally discharged hundreds of mortgages across the country before they were paid off.
This is a tale of what can go wrong when you combine two big banks and some sloppy paperwork, leaving unsuspecting homeowners caught in the middle. The saga started after Bank of America in 2004 acquired FleetBoston Financial, then the largest retail bank in New England.
Bank of America says years after the merger, it discovered some 16,000 mortgages in Fleet’s portfolio that had been paid off, but no one ever filed the paperwork to formally discharge the loans. Fleet typically left it up to customers to file the records with their local registries of deeds, a Bank of America spokesman said, something that didn’t always happen.
The failure to file those records created complications for some homeowners when they tried to sell their properties, only to learn the deeds were clouded by the old loans.
So a few years ago, Bank of America embarked on a complicated project to clean up the records. But in doing so, the bank accidentally created a new problem: It mistakenly discharged hundreds of mortgages on which borrowers still owed money.
That’s when things took an even weirder turn. To fix the mistakes, the bank contacted customers for permission to refile the mortgage paperwork, according to spokesman Bill Halldin. If homeowners didn’t respond or refused to assist, the bank sued. That’s what happened to more than 100 homeowners in Massachusetts, the bank confirmed.
Diane Jaques, a 75-year-old Concord homeowner, was among them; she was sued in May.
“It’s ridiculous,” she said. “It’s their mistake.”
According to the lawsuit, she and her husband originally took out a $200,000 home equity line of credit from Fleet in 2004.
“I’ve never missed a payment,” the semi-retired insurance agent said. Even after her husband passed away, she said, “I get the bill every month and I pay it.”
This past December, Jaques heard from a law firm representing Bank of America that there was an issue with her mortgage. The bank said it had accidentally discharged her loan, even though it was still sending her bills and Jaques was making regular payments.
Then came a flurry of headaches — the bank sent papers for her to sign that had only her late husband’s name on them; months of phone calls; a requirement to get the papers notarized by a notary public who was also a lawyer.
Jaques was so frustrated she put the whole thing aside, she said. Until May, when a WBUR reporter told her the bank was suing her, and many other customers, to correct the records.
“How can this even be allowed?” she said. “It’s very shocking. It’s the last thing I need.”
Bank of America finally dropped the suit this month, after Jaques signed the updated documents. But she’s still annoyed about the ordeal.
“I am done with Bank of America,” she said. “This has been a nightmare.”
The bank said suing the homeowners was just the next step in the process.
“Filing the lawsuits was the only way to ask the court to correct the record if homeowners didn’t voluntarily agree to the correction,” Halldin, the bank spokesman, said in an email.
He said the bank has resolved about three-quarters of the suits it’s filed so far, but may file additional suits if it can’t persuade the remaining customers to sign new paperwork.
He said the bank will cover the cost to correct the records with local registries. It also offered to provide a notary, or to reimburse people for the cost of hiring one.
But homeowners who hired an attorney to handle the lawsuit will likely be on the hook for any legal fees; the bank said it has no plans to reimburse people for attorneys’ costs.
A lawyer for some of the borrowers said she was amazed to learn Bank of America had discharged so many mortgages by mistake.
“ I’ve never heard of a bank prematurely discharging a mortgage,” said Mary Ann Driscoll, a Quincy attorney representing one of the families being sued. “It’s very odd to say the least.”
