Did Bank of America Push Homeowners Towards Foreclosure?
Former employees have alleged that Bank of America (NYSE:BAC) deliberately denied eligible home owners loan modifications and lied to them about the status of their mortgage payments and documents, in a report by Reuters. The strategy was used to push homeowners towards foreclosure and in-house modifications, both of which produced more profits for the bank than the government sponsored Home Affordable Modification Program.
The former employees also allege that those who successfully herded customers towards foreclosure were rewarded through cash bonuses and gift cards. An employee who placed ten more accounts into foreclosure in one month could get a $500 bonus while those who didn’t make the numbers or objected to the business practices would get disciplined or fired.
Twice a month, the bank would carry out an operation called “blitz,” in which they would decline thousands of backlogged HAMP requests because they were more than sixty months old. Testimony from one former employee alleged that the bank handed the government false information, giving the impression that they had given out HAMP loan modifications when it hadn’t.
The former employees were told to fake electronic records and delay homeowners in foreclosure for as long as possible. Eventually, this would lead to homeowners’ applications being included in the “blitz” operation, which was exacerbated by the bank’s lack of employees. Once a HAMP application was rejected, Bank of America would offer an alternative with interest rates as high as 5 percent compared to HAMP’s 2 percent.
Since 2012, 18,000 homeowners have filed complaints to the Consumer Financial Protection Bureau about Bank of America. The bank was right at the heart of the mortgage crisis, having purchased Countrywide Financial (CFC) in 2008. If these allegations prove to be true, it is yet another stain upon Bank of America’s already problematic image.
Bank of America has not released a statement.
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