While Consumers Claim TARP Abuse, BofA Plans Changes To Mod Programs

Posted by Orb Staff on March 24, 2010 No Comments
Categories : Mortgage Servicing

Bank of America is expected to announce today enhancements to its modification programs that are designed to assist several underwater borrowers.

‘These enhancements offer solutions to encourage greater customer participation in Bank of America's aggressive homeownership retention programs,’ according to a media statement from the company.

Reuters, which reports having obtained a summary of the program, says Bank of America will offer ‘earned principal forgiveness,’ of up to 30%, in two stage.

‘The lender will first offer an interest-free forbearance of principal that the homeowner can turn into forgiven principal annually over five years," provided the borrower stays current, Reuters reports, adding that Bank of America plans to launch the program in May.

Meanwhile, Washington homeowners have sued Bank of America claiming the company is intentionally withholding government funds intended to save homeowners from foreclosure.

According to attorneys with Hagens Berman Sobol Shapiro – a consumer-rights class-action law firm – the case, filed in U.S. District Court, claims that Bank of America systematically slows or thwarts Washington homeowners' access to Troubled Asset Relief Program funds by ignoring homeowners' requests for loan modifications.

‘We contend that Bank of America has made an affirmative decision to slow the loan modification process for reasons that are solely in the bank's financial interests,’ says Steve Berman, a managing partner with the firm.

Named plaintiffs and Seattle residents Kamie and Daniel Kahlo contacted Bank of America last year asking to make new arrangements to reduce their monthly loan payments.

According to the complaint, Bank of America told the Kahlos they would not qualify for a home-loan modification unless they were delinquent on payments. Following the bank's direction, the family let payments lapse to meet the bank's requirement. Soon after, they asked Bank of America for a loan modification, providing all necessary documentation requested by the lender, the complaint says.

The suit charges that the bank, in turn, issued new terms and conditions to the Kahlos' home loan agreement, which the couple honored. Several mortgage payments later, the Seattle couple discovered the bank failed to make permanent modifications to their home loan as promised. The Kahlo family also paid an up-front fee of $1,400 to modify their home loan, as required by Bank of America, the complaint adds. Such fees are prohibited under federal regulations of the Home Affordable Modification Program.

‘Bank of America came up with every excuse to defer the Kahlo family from a home loan modification, from stating they 'lost' their paperwork to saying they never approved the new terms of the mortgage agreement,’ says Berman. ‘And we know, from our investigation, this isn't an isolated incident.’

SOURCES: Reuters, Bank of America, Hagens Berman Sobol Shapiro LLP

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