Lawsuits Highlight Troubles With Government’s Loan-Modification Program

by Olga Pierce
ProPublica, Oct. 18, 2010, 1:11 p.m.

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A crop of federal lawsuits are moving forward alleging Bank of America was unfair to homeowners who sought assistance through the government’s main loan modification program.

In a little-noticed decision earlier this month, a federal judicial panel rolled together several class - action lawsuits (PDF) from U.S. district courts across the country and assigned them to a federal judge in Massachusetts, who will decide whether to dismiss the suits, or allow them to proceed.

The decisions she makes could affect more than 100,000 homeowners, and further highlights questions about the performance of the government’s Making Home Affordable program, also called HAMP.

Under the program, banks and other companies that service mortgages are paid by the government for each loan they modify. Homeowners are generally placed in trial periods meant to last three months — but which often drag on much longer. During the trial period, homeowners pay the reduced amount they would be paying with a permanent modification. The trial is a chance for homeowners, many of whom are suffering serious financial hardship, to show they can afford to keep their homes under modified terms.

Plaintiffs in the class were in trial mortgage modifications for Bank of America, and then subsequently denied permanent modifications by BofA. The homeowners argue that the trial agreement was a binding contract stating that if they fulfilled their obligations during the trial they were guaranteed a permanent modification.

The plaintiffs “thought they had saved their homes by qualifying for temporary loan modifications, then the rug was pulled out from under them,” said Stuart Rossman, director of litigation at the National Consumer Law Center, who is representing a group of Massachusetts homeowners. “Homeowners fulfilled their part of the deal, but the bank didn’t do their part.”

If the homeowners’ lawsuits are successful, Rossman said, they are asking only that they be granted the permanent modifications they sought in the first place.

In motions to dismiss filed in several of the cases, however, Bank of America argues that a homeowner’s “Trial Period Plan” is not a binding agreement “because it fails to specify the key terms of the permanent modification.”

Therefore, BofA’s motion continues, it is “nothing more than an agreement to agree at some future date.”

More broadly, the bank argues that individuals are not allowed to sue under Making Home Affordable.

Bank of America spokeswoman Shirley Norton told us that BofA supported the consolidation of cases — since it streamlines the litigation — and said the bank “intends to continue to defend against them aggressively.”

If the cases are not dismissed, it could impact a significant number of homeowners since Bank of America and its subsidiaries have kicked about 160,000 homeowners out of trial modifications so far. Similar litigation is under way against other large mortgage servicers.

They could also serve as a bellwether for many cases in state courts that are not included in this federal class action.

But simply having been through a canceled trial modification is not enough to qualify for the class action. The same panel of judges chose not to include several individual suits against Bank of America because they involved details particular to each case. One man, for example, had his trial canceled because he had sent in payments that were $70 too low, a detail that is not shared by other plaintiffs.

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22 comments

daisy

Oct. 18, 2010, 1:53 p.m.

I previously had my mortgage with Taylor Bean & Whitaker. My regular monthly mortgage payment was $3073.29.

In August of 2009 Taylor Bean & Whitaker gave me a 6 month Special Forbearance agreement trial (September 2009 thru February 2010)
My new mortgage payment would be $2815.79.

In September of 2009 Bank of America became the loan holder for my mortgage, and the new mortgage payment went up to$3291.86?

in the past year i have applied 5 TIMES because they claim they did not receive my documents BS! i have tracked the packages…and i have been working with the HUD counselor.. how many loans have actually been given a PERMANET MODIFICATION? really?

michael

Oct. 18, 2010, 4:05 p.m.

Great article Olga.I would like to speak w/ you.

By the #‘s as posted by propublica as of 8/31/2010

Total # of mods started = 1,334,117
# of mods in trial = 108,137 ( 8.1 %)
# of aged trials ( 6 months or older)= 94,384 ( 7.1 %)
# of mods converted to perm=448,937 ( 33.7%)
# of canceled or denied = 682,659( 51.2%)

assume that a monthly trial period payment is $1,000.00( based on an average monthly savings of $500.00/mowhich = approx savings of 30 %.This is not scientific rather illustrative )
682,659 X $1,000/mo X 3 months=$2,047,977,000
( this is what the bank got for denying mods)
108,137 X $1,000X 3 mo = $324,411,000
( this is what the bank gets for the in-trials)
94,384X $1,000 X 6 mo = $ 566,304,000
( this is what the bank gets for the aged mods)

Add these all together = $ 2,938,692,000

That is almost 3 BILLION $ for denying mods.

This does not include the incentive $ paid to the banks for the loans they do modify.That is at least another 1/2 BILLION !!

What is wrong w/ this picture?

Why would a reasoable person not conclude that the trial payment period is nothing more than a scheme designed to receive partial collection of a debt via deceptive and abusive practices?

By the way, why is there even a trial period?

If there is a legit reason for a trial mod, why then is there no trial period on any loan originated?

Kinda makes you scratch your head and go ” huh”

michael

Oct. 18, 2010, 4:11 p.m.

Daisy, I may be able to shed some light on your mod if you want to correspond

daisy

Oct. 18, 2010, 4:13 p.m.

sure..

Roy

Oct. 18, 2010, 4:38 p.m.

Michael, what about all the fees etc. Even in my case if I am accepted the 2 HOA’s that I pay will be rolled into loan payment amount…even though I have always paid and have always been current on those as well as my mortgage?

Daisy, I have contact info for Michael. He is very knowledgeable concerning HAMP. Plus he is a good soul!

My contact: .(JavaScript must be enabled to view this email address)

Starry

Oct. 18, 2010, 4:41 p.m.

BOA (and C’wide) borrowers - Def Con 1. Man the battle stations. Put away that checkbook.
Their P.R. flack blithely assures us the bank will be “aggressive” in fighting for the right to ignore HAMP and HARP??? Really? This is their thanks for the biggest bailout on record? Huh.
Well, we can be aggressive also.
Stop. Paying. The. Mortgage.
Force them to the table. They can’t foreclose everyone. Make top BOA banker-felon Brian Moynihan sweat. He can lose sleep for a change, with his arrogant “we’ll check our homework” comment about the thousands of errors in his bank’s paperwork. (You know, the papers used to toss families out of their homes…)
Pay your taxes and insurance, and maintain the property. Mine is spit-polished - I dare them to say otherwise. In perfect condition.
But, no thanks to paying the 2006 note on the 2006 boom time nut. You can modify me, baby. Any time, anywhere.
You want aggressive, BOA? You are talking to the daughter of a first-generation Irish trial lawyer. I see you, and I raise you.
Game on, BOA. Bring it.

daisy

Oct. 18, 2010, 4:43 p.m.

classactionlawsuitsinthenews.com

michael

Oct. 18, 2010, 4:46 p.m.

Hey Roy,Escrows may be a bit tricky.However an escrow reconciliation may be requested and lender is required to supply to borrower how every penny of every payment is allocated.Keep the faith
Daisy, if you like , you may e-mail me @ .(JavaScript must be enabled to view this email address) have great contacts #‘s w/ BofA and have had modest success

michael

Oct. 18, 2010, 5:07 p.m.

Starry, I love your attitude !I think it is optimistic to think that everyone would do a 3 month moratorium on their mtg payments but that would get the big 5 to sweat.I prefer to know the system so well that we can use the system against them to get what is our due.HAMP handbook V.2 was published 9/22/10.That is our ammunition!!

Damian

Oct. 18, 2010, 5:52 p.m.

Daisy,

I performed a number of loan modifications with Taylor Bean and Whitaker that were transferred to Spartan Servicing and then to Bank of America. It was necessary to inform Bank of America of Spartan’s involvement and provide the documentation.

daisy

Oct. 19, 2010, 9:26 a.m.

damian, its been over a year now, i myself & the hud counselour im working with have explained that to BOA,i sent them copies of the special forbearance agreement, and nothing. its just been a run around for the past year. i have sent in my application & documents 5 times already. i have written everywhere for help and no ones done anything.

michael

Oct. 19, 2010, 10:56 a.m.

daisy,if you want you can send me an e-mail describing your situation and perhaps i can shed some light

Julie

Oct. 19, 2010, 4:37 p.m.

I, too, have been dealing with BOA for well over a year now with no luck. My loan is now being reviewed for a modification and foreclosure at the same time. BOA told me yesterday that either one can happen. How can they foreclose when the guidelines under the Making Homes Affordable Plan state that before a home can be foreclosed the lender MUST first review the loan for modification? I’m so worn out by BOA and it’s fraudulent actions! Does anyone know if there is a class action lawsuit in Kentucky against BOA regarding this issue? I am at my wits end and want to do whatever I can to keep my home.

Roy

Oct. 20, 2010, 3:30 a.m.

Julie-Unfortunately you must understand that BoA is playing by their own rules…yes the HAMP guidelines state that you cannot be foreclosed while being under review for a mod. Sounds like what they are doing is “extending” you until you have no other resources…then will give you whatever reason for not granting you a mod. Be sure from now on to get names,employee #‘s, time and date of all further correspondence with BoA. You need to contact your state Attorney General and tell them of your situation. Alot depends upon whether KY is either a judicial or non-judicial state when in pertains to 4closure proceedings.I would also contact your local Legal Aid Society…some states have received federal grants for them to assist homeowners regardless of their income…and the service is free. Please contact your AG!!!! Letters to your Senator and Representatives would be helpful also. I was born and raised in Evansville…I know of some honest and knowledgeable people who would be able to help you alot better than myself. My contact info: .(JavaScript must be enabled to view this email address) Good luck to you. And GOD Bless!

jenfierweyer

Oct. 20, 2010, 4:38 p.m.

my husband and i have our loan thru GMAC and are in our 2nd month of our “trial period” we have to make Nov. and Dec trial payment… i have learned that our house is to be sold at auction on dec.12th ...my fear is that we will make our “trial payments” our last one being dec.1st and our house being sold on dec17th because for whatever reason GMAC denies us our permanent modification.

AdriAnne

Oct. 24, 2010, 5:23 p.m.

It says Banks that service mortgages are paid by the government based on how many mortgages they modify I was told by someone at BOA they get paid by the submissions not modifications. I think all they have to do is collect your paperwork and they get paid. I received a letter from BOA’s law firm on a Wed stating I had 30 days to reply to BOA or the law firm. That Saturday a process server was at my door with a summons to appear in court in Nov. No one at BOA or the law firm would contact me for me to tell them I went through HAMP and provided all of the paperwork prior to even getting the letter from the law firm. I have never been to court for anything except a divorce and I am scared to death to lose my home.

AdriAnne

Oct. 24, 2010, 5:53 p.m.

What is the trial period for if not to go permanent!!!! It is not like we are asking for a free home I want my own home. I explained to the counselor with the HAMP program my interest rate is now @ 7.625%. My mortgage is $1282.86 Principle $125.00 Interest $900.00. With a lower interest rate I would be able to keep my home and possibly hand it to my one and only child. BOA just ignores my cries for help.

michael

Oct. 25, 2010, 11:33 a.m.

adrianne, you must call your atty generals office and ask them to intercede !!You must determine if you are eligible for HAMP! Let me know if you want me to review your file

AdriAnne

Oct. 25, 2010, 1:01 p.m.

Michael
Thank you for responding to me. I am not sure what is going on with this but I am petrified . As far as the requirement to qualify for a modification I did meet them. The counselors at HAMP said based on the requirement of HAMP I was more than qualified. As of right now I am not in foreclosure just yet. I am in pre foreclosure. I knew I wasn’t in foreclosure but heading there fast. I took the initiative to do all I can do to save my home which I have owned since 1998. In 2007 I was romanced by Capital One to refinance Which I did but only to upgrade my home. not for extravagance but for more equity in the event that I might sell some time in the future because the Homeowner Association for my home was creating a nightmare for the homeowners. I never had a problem making my payment even after I lost my job. But somehow I got sandwiched between my HOA and Bank of America. If I was late with my HOA payment they threatened placing a lien on the house or make myself and my daughter move out so they could rent the home until my back payments to them were paid., This all started only in the 2009.I felt my only option was to pay the HOA and do as much as possible to pay the mortgage. The late fees from Bank of America were getting to be more than my payments. I did explain this to BOA and they referred me to CredAbility which is the HAMP program because they said I had a hardship. BOA went as far as to send counselors to my home to sit and talk to me about my options they did and explained that my home was nice the suburb that I live in is upscale and the neighborhood also really nice.Bank would move even faster to take my home for those reasons. In Illinois the attorney general Lisa Madigan is aware ad concerned. The Cook County Sheriff Tom Dart has halted the foreclosures again in my state. They want a FBI investigation. Not only are homes being taken but renters are being evicted because the owners of their buildings are being foreclosed on and they have no knowledge that they will have no place to live going into winter. I will again say NO I did not have a subprime mortgage, NO I do not want to live in my house for free. Being notified on a Wed by a law firm that said I had 30 days to reply turned to getting served with a summons 4 days later. Help Michael!!!

Roy

Oct. 26, 2010, 10:19 p.m.

AdriAnne- I responded to you in another article. You need to contact your state Attorney General and the Legal Aid Society immediately. If you need further help I would be able to put you in touch with Michael. He is a good man and very knowledgeable concerning HAMP. But for now you need to contact AG and a good lawyer. My contact: .(JavaScript must be enabled to view this email address) Good Luck and GOD bless All!

Marie

Oct. 27, 2010, 2:23 a.m.

RE:jenfierweyer

Oct. 20, 4:38 p.m.
my husband and i have our loan thru GMAC and are in our 2nd month of our “trial period” we have to make Nov. and Dec trial payment… i have learned that our house is to be sold at auction on dec.12th ...my fear is that we will make our “trial payments” our last one being dec.1st and our house being sold on dec17th because for whatever reason GMAC denies us our permanent modification.

MY RESPONSE:
Jenfier.. if you are making Trial payments and the home is up for sale… there is somethign def- wrong !

What you need to do first and foremost is call the banks loan mod dept as well as the company conducting the sale - the name /info would be on the notice of trustee sale ( if there was one posted on your property) - Let them know, better yet said…REMIND them you are in process of loan mod… and REQUEST it to be postponed… even better request that it be CANCELLED… tell them “kindly” it has to be a mistake , hopefully they’ll say, will send a request ..to “XYZ ” to cancel/ postpone. request to speak to a manager if the person is action like they dont know what you are talking about.
if all goes well -
MEANWHILE… call the bank everyday ..to follow up on that request…in addition call those who are handling the sale (ie: recontrust) to ask if they have any updates form the bank to cancel / postpone that sale date ...

if they say NO…..ask them to “KINDLY” put you on hold..and check the “data base ” they have linked to the bank with postponement requests/ emails ...
i hope you are able to get the sale removed and able to continue your trial ..with out that worry.
what ever you do…..
Do NOT expect your trial payment alone to halt the sale ...it wont!

Everyone at the banks ..( b of A in my case ) is working individually over there ..with no directions whatsoever..

home retention dept doesnt know youre in actual foreclosure ...

the foreclosure dept doesnt know you are in a loan modification

the loan modification dept doesnt even know there is a sale date!

at some point they may even insist there is no sale pending ... until they put the homeowner on hold and verify this for themsleves.

its crazy..
remeber ..you need to do their homework a lot of the time.. they handle so many calls / files .. and have no idea what is going on with yours until you ” remind” them ...and put he puzzle together for them .

Excuse my typos ..im sleepy ..and tired…ive been going through this drama for too long now ....but i saw your question.. and i had to respond. hope it helps Good luck.

michael

Oct. 27, 2010, 10:51 a.m.

adrianne,please e-mail me @ .(JavaScript must be enabled to view this email address) is always confusion re attempting to get a mod while the foreclosure process carries on. while being considered for HAMP the foreclosure proceedings continue, however, the sale will be postponed until a decision is reached( sometimes they postpone 2 weeks before sale, sometimes it is 2 Days)Having said that, if you are denied HAMP you can APPEAL !During the appeal they have to postpone the sale.If the appeal fails you must be considered for an internal mod.
Marie, please see above

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