The state of Arizona has sued Bank of America Corp alleging the lender consistently misled consumers about its home loan modification process, a source familiar with the situation said.
The lawsuit, filed by Arizona Attorney General Terry Goddard's office on Friday, accuses Bank of America of violating a 2009 consent judgment in which it committed to widespread loan modifications, according to a draft copy of the complaint obtained by Reuters.
The suit was filed in an Arizona state court. In it, Goddard's office also accuses the bank of violating the state's consumer fraud act.
A Bank of America representative could not immediately be reached for comment.
Mortgage servicers have come under fire in recent months over abuses in the foreclosure process. Accusations of shoddy documents submitted in foreclosure proceedings have prompted fears that some homeowners may have been wrongfully evicted.
Goddard is on the executive committee of a separate 50-state probe into mortgage servicing practices.
Bank of America temporarily halted home repossessions in October as it reviewed its internal processes.
The bank then said it planned to refile 102,000 foreclosures in so-called judicial foreclosure states, with 70 percent of those cases in Florida. The bank announced last week that it had recently restarted 16,000 home foreclosure cases across the United States.
Arizona is seeking $25,000 per violation of the consent decree, and up to $10,000 for consumer fraud breaches, the lawsuit says. It also asks that Bank of America pay restitution to customers.
(Reporting by Dan Levine; Editing by Tim Dobbyn)