Six former Bank of America Corp. employees have reportedly testified in connection with a lawsuit filed in Massachusetts federal court alleging that the bank deliberately denied loan modifications to eligible homeowners in order to force them into foreclosure.
The former employees, who worked at different bank offices across the U.S. up until last year, claim they were told by upper management to lie to homeowners about the status of their mortgage payments and documents for the purpose of forcing them into foreclosure or getting them to sign modified ‘in-house’ loans at rates of up to 5%, according to a CNBC report.
In affidavits, the ex-employees say they were rewarded with gift cards to stores like Target and Bed, Bath & Beyond by management for denying modifications requested under the Home Affordable Modification Program (HAMP). They say management had made it a practice to shepherd distressed homeowners into foreclosure – or get them to agree to the in-house loan modifications – because the bank stood to make more profits on those deals than it could from referring homeowners to HAMP.
The lawsuit brought by dozens of borrowers also alleges that Bank of America inflated the number of HAMP loans it reported to the government, basically by ‘double-counting’ the number of loans as they went through different stages of the approval process.
According to the suit, Bank of America routinely denied loan modification requests by telling homeowners that their paperwork was never received. It also alleges that the bank engaged in an operation called ‘blitz,’ where it purged loan modification requests that were more than 60 days old from its databases, upon which bank representatives would tell homeowners that the paperwork was never received.
The case is one of several that have been brought against Bank of America and other top U.S. banks in recent years over the alleged mishandling of mortgage modifications. Since 2010, Bank of America has paid more than $42 billion to settle credit crisis and mortgage-related litigation, according to the CNBC report.
Last year, Bank of America and four other Wall Street banks reached a $25 billion landmark settlement with regulators after an investigation revealed that employees ‘robo signed’ documents without verifying them.