(CN) – More than 100 Florida homeowners claim Bank of America fraudulently delayed or destroyed their applications to modify the terms of their mortgages to steal their homes and sell them at a profit.
In a 300-page federal complaint filed Tuesday in Orlando, the homeowners say Bank of America is guilty of fraud and unfair business practices that led to thousands of dollars in fees and the loss of their homes.
The lawsuit is the latest salvo against Bank of America’s disastrous handing of the Home Affordable Modification Program, or HAMP, initiated by the federal government in response to the subprime mortgage crisis.
The complaint says Bank of America crafted a “fraudulent scheme” to process just enough HAMP mortgage modifications to not arouse the suspicion of federal regulators, while also developing “methodical business practices designed to intentionally prevent scores of eligible homeowners from becoming eligible or staying eligible for a permanent HAMP modification.”
“Bank of America and its agents never properly hired, trained or equipped a workforce to genuinely address the scores of homeowner complaints and regulatory inquiries, and instead developed systems and procedures that deliberately obfuscated, misled and otherwise deceived those homeowners and regulators, resulting in ineligibility through no fault of the homeowner,” the complaint says.
To achieve this, the residents say, Bank of America contracted with Urban Lending Solutions to process the modification applications. According to the lawsuit, Urban Lending Solutions hired many temporary workers with no experience and gave them hundreds of HAMP files to service.
Citing some of these former employees, the complaint claims Bank of America agents routinely lied about incomplete or missing documents in order to delay filing. In some cases, the complaint says, Bank of America shredded applications without any review or deleted them from the company’s computer systems.
“Upon the instruction of my manager Jamal Brown, and other managers, I deleted thousands of homeowner HAMP application files from Bank of America computer databases, as many as 6,000 in one day,” said former employee Rodrigo Heinle, according to a testimony in an earlier class action suit against Bank of America included in the present lawsuit’s exhibits.
Another employee who testified in the above case said she witnessed “employees and managers change and falsify information in the systems of record, and remove documents from homeowners’ files to make the account appear ineligible for a loan medication.”
All the while, the residents say, Bank of America collected servicing fees from the homeowners and sometimes advised them to stop paying mortgage payments all together – all to lead them to foreclosure.
“By delaying the process, it didn’t cost [Bank of America] anything and, ultimately, they were paid by the Treasury for these modifications,” said attorney John Adams Jr., who filed the lawsuit on behalf of the homeowners. “In the end, Bank of America created a system of fraud.”
Representatives of Bank of America did not immediately respond to a request for comment.
The federal government created HAMP in 2009 as part of the larger Troubled Asset Relief Program, or TARP, which was created to help bail out the country’s major banks during the financial crisis.
In an effort to save millions of Americans from losing their homes, the federal government gave the major banks billions to screen homeowners and modify their mortgage loans to make them more affordable.
If the homeowner satisfied the program’s requirements, including financial hardship and a high debt-to-income ratio, he or she would enter a three-month trial payment period. After the successful payments, the modification could become permanent for five years and then interest rates could only incrementally increase.
“In order to frustrate the borrowers and disguise its fraudulent scheme, Bank of America instructed bank employees to falsely inform scores of borrowers their modification application was either ‘under review,’ incomplete or simply had not been received,” the complaint states. “These misrepresentations and fraudulent scheme caused scores of borrowers to send and resend their HAMP modification applications over and over under the false impression and hope of saving their home.”
One couple’s experience featured in the complaint is typical of the accusations.
In 1998, Maria and Jorge Gonzalez Torres bought a modest home in Ocala, Florida for $52,000. After a refinancing, Bank of America began servicing their loan. In 2009, after suffering through the financial crisis, the couple requested a HAMP modification.
According to the complaint, a Bank of America loan representative told the Gonzalez’ to stop making regular mortgage payments to qualify for the modification and sent them an application. After sending it in, bank employees told the couple they did not receive all the documents required. The Gonzalez’ sent in their application and supporting documents more than three times, the complaint states.
Finally, without any written proof, a bank representative verbally told the Gonzalez’ they were approved and requested “trial payments” of $1,200. These payments were never applied, the complaint says, and the couple’s home was foreclosed upon the next year.
“There is a disproportionate impact on Tampa’s own Spanish-speaking community,” Adams said.
Adams said many of the homeowners were not aware of the predatory lending practices of Countrywide, who approved many of these loans before Bank of America took control of the ailing company.
“Bank of America saw these homeowners and said there’s no way we’re going to modify these mortgages,” he said.
Bank of America’s problems implementing HAMP are well-documented.
The bank has one of the worst track records in HAMP, according to the Office of the Special Inspector General for the Troubled Asset Relief Program, a law enforcement agency created in 2008 to target financial crimes.
Bank of America denied more than 79 percent of homeowners, according to a January report by the agency, while more than 36,000 fell out of the program. The agency estimates the bank’s actions have cost taxpayers hundreds of millions of dollars, despite a receiving nearly $2 billion over the years to implement HAMP.
The investigations into Bank of America resulted in a 2012 settlement with the U.S. Department of Justice, yet the inspector general report found more instances of wrongful denials in 2016, according to the report.
The report, which was given to Congress, also expressed concern over the tens of thousands of application still backlogged and the possibility the bank may resort back to old habits to meet the program’s final deadline in September.