California's largest banks have been accused of illegally keeping more than $270 million in title transfer fees for papers that were never filed.
Two lawsuits, filed in May and June under California's False Claims Act, allege that Bank of America Corp., Norwest Bank, NationsBanc, World Bank, California Federal Bank, and others charged homeowners a title fee of $65 to $200 when selling or refinancing their home, then failed to transfer the ownership deed when the mortgage was paid off.
The complaint alleges that the financial institutions kept and profited from the fees and submitted false forms to the state rather than pay the unused fees to the state, as required by state law.
The so-called "qui tam" lawsuits were filed in Los Angeles Superior Court by Burbank, Calif., resident William Bowen, who could not be reached for comment.
Using a "qui tam" lawsuit, an individual may file on behalf of a group of people or the state, according to a spokeswoman for the Los Angeles attorney general's office, who added that it is up to the court to determine how any damages would be distributed.
Mr. Bowen's lawsuits reportedly claim that the defendants have defrauded the state of more than $10 million per year since 1972.
The lawsuits are under seal, and neither lawyers for the plaintiff nor the attorney general's office would comment on the particulars.
However, a copy of one of the lawsuits was obtained by American Banker. It seeks more than $130 million in damages and says in part:
"The defendants failed to report and escheat to the state the monies that defendants had improperly demanded and obtained from homeowners throughout California for the reconveyance of deeds of trust. ... In short, defendants demanded and received the reconveyance fees from the homeowners, never performed the reconveyances, and never refunded the fees to the homeowners."
In that lawsuit, Mr. Bowen is seeking damages from a long list of banks that have done business in the state, including some that no longer exist:
Bank of America, Security Pacific Bank, Washington Mutual, Glendale Federal Bank, Downey Savings Bank, NationsBanc, World Bank, First Nationwide Bank, California Federal Bank, Home Savings of America, Household Bank, Beneficial Finance, Union Bank, PNC Bank Corp., and Norwest Bank.
Bank of America spokesman Richard Beebe said the suit is "flat-out factually inaccurate."
"The complaint is alleging that 25% of banks don't reconvey the title back to the homeowner once the loan is paid in full," Mr. Beebe said. "For us, we approach 100%-of-the-time reconveyance."
The fee to transfer title from a bank to a homeowner is typically $65, but some lenders waive this fee.
Jon Ferchen, a spokesman for the Wells Fargo mortgage unit Norwest Mortgage, declined to comment on the suit beyond saying that his company does not charge reconveyance fees.
PNC Bank Corp. and Washington Mutual also declined to comment.