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Pasco homeowner sues Bank of America over flood insurance requirements

New Port Richey resident James Wright is no stranger to litigation. He sued for malpractice upon the death of his newborn daughter. He sued with the backing of the Equal Employment Opportunity Commission after being turned down for a position with the Department of Motor Vehicles.

"I've been in federal court more times than most lawyers," he jokes.

Now, Wright is going after Bank of America's mortgage operation in a potential class-action suit. In a complaint filed in U.S. District Court in Tampa, Wright alleges the megabank forced him to buy more flood insurance than required under federal law, costing him an extra $500 in annual premiums.

Wright, 63, has lived in a one-story masonry home in New Port Richey for 17 years. In 2004, he refinanced with Countrywide Financial, securing a flood insurance policy that more than covered his mortgage. He figured that was adequate based on the National Flood Insurance Act, which states that a homeowner should carry coverage at least equal to the outstanding balance of a mortgage or up to a maximum of $250,000 "whichever is less."

Last year, after Bank of America took over Countrywide, Wright received a letter from the bank indicating that he must increase his flood insurance coverage from $97,000 to about $137,000. In a followup notice, the bank said he needed coverage equal to his hazard insurance coverage "as that is the amount that would be required to rebuild the dwelling."

Because Wright did not agree to buy additional coverage, Bank of America added a "gap" flood policy to his account for $97,400 in October, pushing his total flood coverage up to $194,800.

Wright's suit accuses Bank of America of fraud, violation of a federal statute and violation of the RICO antiracketeering law.

Bank of America spokesman Rick Simon said the Charlotte, N.C., bank has not seen the suit yet and could not comment.

The National Flood Insurance Program is operated by the Federal Emergency Management Agency. A FEMA spokeswoman declined to comment on whether banks can require greater flood coverage beyond the amount needed to cover the mortgage, saying that was an issue for bank regulators.

Dean DeBuck of the Office of the Comptroller of the Currency said banks are allowed to require more than the mortgage amount up to the replacement cost or $250,000, whichever is less.

Wright is sure Bank of America's policy isn't unique. One of his neighbors recently objected after Wells Fargo tried to make him raise his escrow to pay for more flood insurance.

"Apparently (Wells Fargo) is returning him the money and knocking it off," Wright said, adding that he doesn't expect to be as fortunate. "Bank of America always plays hardball."

Pasco homeowner sues Bank of America over flood insurance requirements 05/27/10 [Last modified: Thursday, May 27, 2010 9:18pm]

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