Former Bank Of America Employees Say They Were Told To Lie About Home Refinancing
by Corey Hjalseth, KHQ Local News Contributor - email
Photo from The NYT
Bank of America
routinely denied qualified borrowers a chance to modify their loans to
more affordable terms and paid cash bonuses to bank staffers for pushing
homeowners into foreclosure, according to affidavits filed last week in
a Massachusetts lawsuit.
"We were told to lie to customers,"
said Simone Gordon, who worked in the bank's loss mitigation department
until February 2012. "Site leaders regularly told us that the more we
delayed the HAMP [loan] modification process, the more fees Bank of
America would collect."
In sworn testimony, six former employees
describe what they saw behind the scenes of an often opaque process that
has frustrated homeowners, their attorneys and housing counselors.
describe systematic efforts to undermine the program by routinely
denying loan modifications to qualified applicants, withholding reviews
of completed applications, steering applicants to costlier "in-house"
loans and paying bonuses to employees based on the number of new
foreclosures they initiated.
The employees' sworn testimony goes a
long way to explain why the government's Home Affordable Modification
Program, launched in 2008 during the depths of the housing collapse, has
fallen so far short of the original targets to save millions of
Americans from being tossed from their homes.
Bank of America
denied the allegations in the affidavits, which were filed in a
Massachusetts lawsuit on behalf of dozens of Bank of America borrowers
in 26 states.
"We continue to demonstrate our commitment to
assisting customers who are at risk of foreclosure and, at best, these
attorneys are painting a false picture of the bank's practices and the
dedication of our employees," a spokesman said in a statement. "While we
will address the declarations in more depth when we file our opposition
to plaintiffs' motion next month, suffice it is to say that each of the
declarations is rife with factual inaccuracies."
the housing crisis unfolded in 2007, Bank of America and other large
mortgage servicers have maintained that the widespread delays in
processing loan modifications largely resulted from an overwhelming and
unprecedented wave of troubled loans.
But regulators have
repeatedly cited lenders for mistreating borrowers trying to modify
their mortgages. In April 2001, five big banks—including Bank of
America—settled a sweeping complaint with 49 states and several federal
regulators about their foreclosure and loan modification practices. The
banks agreed to provide $26 billion in relief and adhere to a sweeping
series of new rules when modifying loans.
Later this week, a
monitor assigned to track the bank's practices will issue a report
that's expected to cite ongoing violations of those new rules.
their sworn testimony, the former Bank of America employees detail a
series of specific company policies designed to provide as little
foreclosure relief as possible.
"Based on what I observed, Bank of
America was trying to prevent as many homeowners as possible from
obtaining permanent HAMP loan modifications while leading the public and
the government to believe that it was making efforts to comply with
HAMP," said Theresa Terrelonge, a Bank of America collector until June
2010. "It was well known among managers and many employees that the
overriding goal was to extend as few HAMP loan modifications to
homeowners as possible."
The reason was fairly simple, according
to William Wilson Jr., who worked as a manager in the company's
Charlotte, N.C., headquarters, where he supervised 13 mortgage
representatives working on with customers seeking HAMP loan
After stonewalling qualified borrowers seeking an
affordable HAMP loan, Bank of America representatives could upsell them
to a more costly "in-house" loan modification, with rates 3 points
higher than the 2 percent rate available under HAMP guidelines, Wilson
"The unfortunate truth is that many and possibly most
of these people were entitled to a HAMP loan modification, but had
little choice but to accept a more expensive and less favorable in-house
modification," he said.
Courtney Scott was among the Bank of
America customers who experienced repeated delays and denials for a
government-sponsored modification of the mortgage on her suburban
Atlanta home. The retired nurse and grandmother grew increasingly
frustrated after bank representatives repeatedly requested she fill out
paperwork covering the same information.
So she was surprised when the bank approved her six months later for an "in-house" modification.
got the [HAMP] denial in January, 2010 and then in June they came back
with an in-house offer saying 'Congratulations, you've been approved for
a modification,'" said Scott. "But it only lowered my payments by about
$7 and some cents."
Scott turned down the offer and the bank moved to foreclose,an action she is contesting with the help of an attorney.
frustration in complying with the banks request was designed to
motivate her to agree to the in-house modification according to the
former Bank of America workers.
In his affidavit, Wilson said most
of the information the bank repeatedly requested from homeowners was
already available in multiple document review systems. Some completed
applications were denied one at a time, while other borrowers were
rejected en masse in a process known as "the blitz," Wilson said.
twice a month, Bank of America would order that case managers and
underwriters 'clean out' the backlog of HAMP applications by denying any
file in which the financial documents were more than 60 days old," he
said. "These included files in which the homeowner had provided all
required financial documents."
The procedures described in the
affidavits will come as no surprise to attorneys working with borrowers
trying to save their homes from foreclosures, according to Max Gardner, a
North Carolina bankrupctcy attorney who trains other lawyers on legal
strategies to thwart foreclosure
"This policy—of dragging it out
as long as we possibly can and tell [the homeowner] you didn't qualify
or the mod failed or we didn't get this document or you didn't sign it
in the right place or we lost this form—is consistent with what we've
seen," he said.
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