CHARLOTTE, NC (Deon Roberts/The Charlotte Observer) - A new lawsuit says Bank of America misled borrowers trying to hang onto their homes, pushing them into foreclosure while it enriched itself off a federal mortgage-modification program.
The suit, filed this month in federal court in Charlotte, is the latest to allege the Charlotte-based company abused homeowners seeking to reduce their mortgage payments through the Home Affordable Modification Program, or HAMP. The U.S. Treasury Department launched the program in 2009 following the financial crisis to help struggling homeowners avoid foreclosure.
Brought by 11 borrowers across the U.S., including one in North Carolina's New Hanover County, the suit was initially filed last month in Mecklenburg County Superior Court before being moved to federal court. The suit says it involves individual borrowers after a federal judge in Massachusetts in 2013 denied a request to grant class-action certification for a case against Bank of America involving HAMP applicants from across the U.S.
In issuing that rejection, the judge determined that borrowers had been subjected to a "Kafkaesque bureaucracy" and that they had plausibly alleged Bank of America "utterly failed" to administer modifications in a timely and efficient way. But the judge also said the various claims were too different to justify folding them into a single class-action case.
In a court filing addressing the latest suit, Bank of America made a similar argument, saying the 11 borrowers were improperly filing a single case when their claims were distinct and unrelated. The bank declined to comment beyond the filing.
Many allegations in the new case are similar to, or cite, those made in previous lawsuits against Bank of America over its handling of HAMP applicants.
Among claims in the latest suit:
- Bank of America falsely told applicants they had to stop making regular monthly mortgage payments to be eligible for a HAMP modification. It was part of the bank's scheme to prevent borrowers from receiving a modification so that it could acquire their homes through foreclosure.
- Bank of America employees made homeowners submit applications over and over in order to frustrate them, ensuring that their mortgage would be denied a modification. Applications were intentionally lost or destroyed to prevent borrowers from getting a modification. The bank's employees also falsely told applicants that documents were not current or were missing, in order to delay modification requests and ultimately deny them.
- Bank of America profited from charging borrowers fees for unnecessary and unlawful property inspections. The bank did not tell borrowers the inspections were taking place or that they were being charged for them.
The North Carolina borrower, Chester Taylor, contacted the bank in 2010 to request a modification after experiencing financial hardship in part because of the down economy, the suit says.
Taylor stopped making his mortgage payments on the advice of a bank representative, fell into default and Bank of America foreclosed on his home in 2012. As a result of the foreclosure, a judgment of $117,130 was entered against Taylor, who then filed for bankruptcy.
Bank of America has previously attracted the scrutiny of government authorities for its conduct under HAMP. In 2012, it entered into a settlement with authorities to resolve claims it defrauded the program as part of a landmark $25 billion settlement involving other large banks accused of mortgage and foreclosure abuses.
Last year, the special inspector general for the Troubled Asset Relief Program, the federal bailout program for the financial system, issued a report to Congress that said Bank of America had denied 79 percent of HAMP applicants. That performance required deeper Treasury scrutiny into whether the bank is properly evaluating homeowners, according to the report.