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BofA lied to homeowners and rewarded foreclosures, former employees say

By Paul Kiel


LAST UPDATED: 08:53 a.m. HST, Jun 20, 2013

bloomberg news / february 2012A Bank of America Corp. loan negotiator helps a homeowner with terms of a mortgage restructuring at the Neighborhood Assistance Corp. of America Save the Dream event in Los Angeles.

Bank of America employees regularly lied to homeowners seeking loan modifications, denied their applications for made-up reasons, and were rewarded for sending homeowners to foreclosure, according to sworn statements by former bank employees.

The employee statements were filed late last week in federal court in Boston as part of a multi-state class action suit brought on behalf of homeowners who sought to avoid foreclosure through the government's Home Affordable Modification Program (HAMP) but say they had their cases botched by Bank of America.

In a statement, a Bank of America spokesman said that each of the former employees' statements is "rife with factual inaccuracies" and that the bank will respond more fully in court next month. He said that Bank of America had modified more loans than any other bank and continues to "demonstrate our commitment to assisting customers who are at risk of foreclosure."

Six of the former employees worked for the bank, while one worked for a contractor. They range from former managers to front-line employees, and all dealt with homeowners seeking to avoid foreclosure through the government's program.

When the Obama administration launched HAMP in 2009, Bank of America was by far the largest mortgage servicer in the program. It had twice as many loans eligible as the next largest bank. The former employees say that, in response to this crush of struggling homeowners, the bank often misled them and denied applications for bogus reasons.

Sometimes, homeowners were simply denied en masse in a procedure called a "blitz," said William Wilson, Jr., who worked as an underwriter and manager from 2010 until 2012. As part of the modification applications, homeowners were required to send in documents with their financial information. About twice a month, Wilson said, the bank ordered that all files with documentation 60 or more days old simply be denied. "During a blitz, a single team would decline between 600 and 1,500 modification files at a time," he said in the sworn declaration. To justify the denials, employees produced fictitious reasons, for instance saying the homeowner had not sent in the required documents, when in actuality, they had.

Such mass denials may have occurred at other mortgage servicers. Chris Wyatt, a former employee of Goldman Sachs subsidiary Litton Loan Servicing, told ProPublica in 2012 that the company periodically conducted "denial sweeps" to reduce the backlog of homeowners. A spokesman for Goldman Sachs said at the time that the company disagreed with Wyatt's account but offered no specifics.

Five of the former Bank of America employees stated that they were encouraged to mislead customers. "We were told to lie to customers and claim that Bank of America had not received documents it had requested," said Simone Gordon, who worked at the bank from 2007 until early 2012 as a senior collector. "We were told that admitting that the Bank received documents ‘would open a can of worms,'" she said, since the bank was required to underwrite applications within 30 days of receiving documents and didn't have adequate staff. Wilson said each underwriter commonly had 400 outstanding applications awaiting review.

Anxious homeowners calling in for an update on their application were frequently told that their applications were "under review" when, in fact, nothing had been done in months, or the application had already been denied, four former employees said.

Employees were rewarded for denying applications and referring customers to foreclosure, according to the statements. Gordon said collectors "who placed ten or more accounts into foreclosure in a given month received a $500 bonus." Other rewards included gift cards to retail stores or restaurants, said Gordon and Theresa Terrelonge, who worked as a collector from 2009 until 2010.

This is certainly not the first time the bank has faced such allegations. In 2010, Arizona and Nevada sued Bank of America for mishandling modification applications. Last year, Bank of America settled a lawsuit brought by a former employee of a bank contractor who accused the bank of mishandling HAMP applications.

The bank has also settled two major actions by the federal government related to its foreclosure practices. In early 2012, 49 state attorneys general and the federal government crafted a settlement that, among other things, provided cash payments to Bank of America borrowers who had lost their home to foreclosure. Authorities recently began mailing out those checks of about $1,480 for each homeowner. Earlier this year, federal bank regulators arrived at a settlement that also resulted in payments to affected borrowers, though most received $500 or less.

The law suit with the explosive new declarations from former employees is a consolidation of 29 separate suits against the bank from across the country and is seeking class action certification. It covers homeowners who received a trial modification, made all of their required payments, but who did not get a timely answer from the bank on whether they'd receive a permanent modification. Under HAMP, the trial period was supposed to last three months, but frequently dragged on for much longer, particularly during the height of the foreclosure crisis in 2009 and 2010.

ProPublica began detailing the failures of HAMP from the start of the program in 2009. HAMP turned out to be a perfect storm created by banks that refused to adequately fund their mortgage servicing operations and lax government oversight.

Bank of America was far slower to modify loans than other servicers, as other analyses we've cited have shown. A study last year found that about 800,000 homeowners would have qualified for HAMP if Bank of America and the other largest servicers had done an adequate job of handling homeowner applications.


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northshore01 wrote:
BofA. Question. What happened to the money for the people who committed suicides because they lost everything?
on June 19,2013 | 07:38PM
mikethenovice wrote:
Suicide is a permanent solution to a temporary problem. Seek help. Don't do it.
on June 20,2013 | 07:29AM
winkeno wrote:
BofA also made false statements to mortagage holders who were experiencing financial crisis. Holders were told that they had to be in default (missed mortgage payments) to qualify for HAMP. So many holders defaulted purposely to qualify for HAMP. This action by holders resulted in their credit report(s) being damaged beyound repair because BofA reported to credit bureaus "late payment-180 days, etc. When if fact holders could qualify for HAMP without being in "mortgage default". During HAMP trail payments, BofA had to report to credit bureaus that mortgage payments were timely and NOT LATE, because when holders begain the HAMP trial payments, they were not in "defalut".
on June 19,2013 | 09:47PM
OldDiver wrote:
Easy solution to this problem. Put the Wall Street Banksters in prison.
on June 20,2013 | 09:25AM
allie wrote:
Agree. B of A is an utter disgrace. And you all bailed out the greedy incompetents and virtually none of them went to jail. Great deal for bankers but a very bad deal for the middle class.
on June 20,2013 | 10:12AM
mikethenovice wrote:
The big print gives, and the small prints takes away. Read the small print first.before you sign or walk away.
on June 20,2013 | 07:27AM
mcc wrote:
Banks are not a friend to the general public. They constantly try to bleed the poor.
on June 20,2013 | 07:39AM
nodaddynotthebelt wrote:
My sentiments exactly. They give you so little in the form of a fraction of a percent to hold your money and then turn around and charge you a lot of money to borrow money, some of which are yours, and get this, if you are late, they charge you even more. And if they mess up on their end, all you get is a simple apology. That's the banks for you. In the case of a friend of mine, it was a nightmare. A crook stole money from his account just by using a fake ID with a non-matching photo and non-matching signature. The teller simply gave him the money based on this fake ID. The teller never once apologized to him for all the hours he had to spend to deal with the mess that resulted. And to add insult to injury the supervisor told him that she could not expect to have all of her workers follow procedures all of the time. This is a true story. If my friend did not check his balances, he would not have known that a thief had stolen hundred of dollars from his account. I would advise all to check your balances regularly as all a crook needs is a fake ID to steal your hard earned money.
on June 20,2013 | 09:33AM
nodaddynotthebelt wrote:
Bank of America keeps doing these things and people still keep coming back to them. They either have the best PR machine or people are just blind.
on June 20,2013 | 09:19AM
allie wrote:
on June 20,2013 | 03:24PM
tiki886 wrote:
Most of the local "bad" loans were originated by local banks such as Bank of Hawaii, First Hawaiian, American Savings, etc and then the servicing was sold to Bank of America and other larger banks such as Wells Fargo, Citi Bank. etc.

So before Hawaii residents that are/were in trouble that were dealing with BofA, ask yourself, who originated and approved your loan in the first place?

Even the local credit unions were originating these "bad" mortgage loans. Credit union members should ask how their loans ended up with BofA or Wells Fargo.

on June 20,2013 | 09:33AM
false wrote:
there are no friendly, neighborhood bankers. There's a reason bankers are stereotyped as being cold-hearted and there's a reason banks spend so much on advertising and PR to convince you that they're otherwise. Bank of Hawaii's "just us folks" ads and American Savings ads that use humor are like putting lipstick on a pig. Unfortunately, most of us need banks to loan us money to buy cars and houses and do other things. If you must deal with a bank, protect yourself by reading every document or having someone you trust do it for you. Trust me, those documents are heavily tilted in the bank's favor, so you'll want to give them due consideration.
on June 20,2013 | 09:39AM
allie wrote:
on June 20,2013 | 03:25PM
entrkn wrote:
Every foreclosed home owner should be able to reclaim their homes and collect double the value of their mortgages in damages from BOA.
on June 20,2013 | 09:51AM
tiki886 wrote:
What the article doesn't include are the difficulties that made many loans almost impossible to fit into the HAMP program. If you have an equity line of credit which is the same thing as a 2nd mortgage, they may not cooperate if it is with another bank. Your loan may also have mortgage insurance. If you live in a condo, your Association of Apartment Owners may also have a lien on your property for non payment of your maintenance fees. All these different entities may have to be involved in the decision making process. Every loan is different.

How do you "modify" your existing 1st mortgage if your 2nd mortgage loan and your AOAO is filing a foreclosure action against you? The mortgage insurance company or the 2nd mortgage company may also refuse to lift their lien even temporarily because they have no incentive to cooperate with the 1st mortgagee since they stand to lose all of their loan proceeds anyway because their loans or exposure is less than the value of your home.

Which brings me back again to who originated and approved your loan in the first place? They are the ones who got paid by you. They also got paid when they sold your loan to Bank of America.

on June 20,2013 | 09:55AM
tiki886 wrote:
Obama's HAMP program also allows the no income, no employment verification and even if your property value is lower than your loan amount. Isn't that what got these people into trouble in the first place?

The government created the mortgage meltdown problem in the first place and then creates an untenable situation for banks and lenders to "modify" a loan that the borrower still can't make payments even after the "modification".

I read an article that more than 50% of all the "modifications" end up in foreclosure anyway even when the payment was cut in half.

on June 20,2013 | 10:10AM
tiki886 wrote:
If you couldn't pay your rent and your landlord evicted you, would you: 1- find a cheaper place to rent; 2 - see if you can live with friends or family; 3 - find a better paying job or 4 - k i l l yourself?
on June 20,2013 | 10:41AM
cojef wrote:
Bank of America was started by an Italian immigrant in San Francisco. The bank grew statewide and went nationwide to compete on a global scale. At first their dealings were friendly and trustworthy. As the bank grew larger, the CEO got greedier and began the buyout the small local banks and justified their growth by voting themselve big bonuses and increased the incentives. Dealings with customers became very indifferent and profit driven. Originally a customer was related to as customer. Bigness created a monster and it lost its neighborhood friendliness. Spouse was an employee and became stockholder in the employee stock purchase program. With bigness, the stock is almost worthless, once each stock was over $70, today less than $10. Bigness is not always good for customers as well as small stockholders, only good for the big boys on the executive level.
on June 20,2013 | 12:11PM
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