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Friday, July 12, 2024 | Back issues
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Bank of America Faces False Claims Act Suit

MANHATTAN (CN) - Bank of America defrauded the federal government and homebuyers by cheating on the Home Affordable Refinance Program, a homebuyer claims in a False Claims Act complaint in Federal Court.

The United States ex re. John J. Platz, Relator, sued Bank of America in a lawsuit filed under seal a year ago and unsealed on Tuesday.

"The Home Affordable Refinance Program ('HARP') was developed so that consumers with a history of on-time mortgage payments, and whose home values had plummeted during the economic crash, could take advantage of low interest rates and refinance their homes at a lower interest rate," the complaint states.

Under the HARP 2.0 program, Fannie Mae and Freddie Mac "waived representations and warranties for banks who already serviced the borrowers' loans in order to encourage banks to allow consumers to refinance their loans," according to the complaint.

Platz calls Fannie Mae and Freddie Mac "GSEs," or government-sponsored entities.

The lawsuit continues: "Most importantly, through HARP 2.0, the FHFA decreased or removed entirely certain risk-based fees called 'loan level price adjustments' ('LLPAs') on refinanced loans purchased by the GSEs.

"The LLPAs were an added cost to banks originating HARP loans and were passed along to homeowners in the form of higher interest rates or origination points charged to the homeowner at closing. By waiving or reducing the LLPAs for homeowners who qualified for the HARP program, the FHFA intended to remove barriers to refinancing and provide homeowners the lowest possible rates in refinancing their homes, thereby reducing the risk of default and the

ultimate cost of foreclosures to the government. The program was also intended to be a stimulus to the economy by providing savings to borrowers who normally would not be able to refinance their homes and take advantage of lower interest rates.

"National banks, such as Bank of America, agreed that if FHFA implemented the removal/reduction of LLPAs through HARP 2.0 and waived representations and warranties for same-servicers, the banks would not add their own restrictions and 'overlays' to HARP 2.0, in order to keep HARP 2.0 refinance rates low. Instead of honoring this condition to implementation of the program, Bank of America has purposefully charged HARP 2.0 customers much higher interest rates than its other customers. After the GSE's LLPAs were reduced or removed under HARP 2.0, Bank of America actually increased the fees it added to HARP refinance customers. Instead of passing on the discount from the removal/reduction of LLPAs m1der HARP 2.0, Bank of America profited at the expense of the taxpayers. By fraudulently inducing the government to implement changes to HARP 2.0 and then refusing to pass along reductions in LLPAs to consumers, Bank of America violated the conditions of payment for HARP 2.0, and submitted thousands of false claims to the GSEs for HARP 2.0 loans."

Platz seeks damages for the government and taxpayers, and his share under the False Claims Act. His lead counsel is Loren Jacobson with Waters & Kraus, of Dallas.

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