Twenty homeowners are suing Bank of America for fraud after the bank denied them a program that would lower mortgage payments.
Home Affordable Modification Program (HAMP) was designed to help homeowners affected by the market crash in 2008. The program would reduce monthly mortgage payments to 31 percent of the borrower’s pretax monthly income.
Eligibility for the program is based on five factors:
— You struggle to make mortgage payments due to financial hardship
— You are delinquent or in danger of missing payments
— Your mortgage was set before 2009
— Your property isn’t condemned
— You owe less than $729,750 on the property
Mortgage companies across the nation took part in the HAMP program.
In April 2009, HAMP was adopted by Bank of America. In exchange, the government provided the bank with hundreds of millions of dollars, says the suit.
Bank of America never trained its employees on the proper procedure for handling HAMP applications. The company contracted Urban Lending Solutions to help sort through the thousands of HAMP applications received.
According to multiple sworn declarations from past Bank of America and Urban Lending employees, a fraudulent scheme was enacted by the institution.
Employees were instructed to delay HAMP applications by telling customers they were still under review even if they were not. The company then began a procedure they called a “blitz.” Blitz’s occurred nearly twice a month. During a blitz, employees would deny all files over 60 days old. These “old” files were caused by employees not submitting them promptly and had nothing to do with borrowers slacking on turning in forms. Forms that were filed correctly went through Urban Lending. Underwriters looking over cases wouldn’t know to check Urban Lending’s database to find the forms and would presume that the application wasn’t ever completed.
One declaration said employees had quotas to meet for placing homes into foreclosure. They could be terminated if they did not meet the quota. Incentives, like gift cards and bonuses, were given to those who met the quota.
Many homeowners who did not receive the modification lost their homes to foreclosure.
A plaintiff in the suit, Rafael Paz, lost his home after his HAMP application was denied. Paz attempted to file the application and subsequent documents to the bank four times. Each time, he would be told the documents were either not received or were incomplete.
On one occasion, Paz was informed by a Bank of America employee that to be approved, he should default on his payments. He did as he was told, and later the employee verbally informed Paz that he was approved to begin making trial payments. Paz was never actually approved, and the trial payments he made went to other fees the bank claimed he had to pay.
By 2012, Bank of America foreclosed on his home. Each of the 19 other plaintiffs have similar stories.
In its March 2011 HAMP Performance Report, Bank of America had a conversion rate of about 30 percent. A conversion rate it the percentage of borrowers who converted from Trial Payment Period modifications to permanent modifications. Other lenders, like Wachovia Mortgage, had an 89 percent conversion rate.
In a 2013 class action against Bank of America, the Massachusetts District Court deemed it should be up to individuals to sue the institution.