Bank of America
employees regularly lied to homeowners seeking loan modifications, denied their
applications for made-up reasons, and were rewarded for sending homeowners to
foreclosure, according to sworn statements by former bank employees.
The employee statements were filed late last week in federal
court in Boston as part of a multi-state class action suit brought on behalf of
homeowners who sought to avoid foreclosure through the government’s Home
Affordable Modification Program (HAMP) but say they had their cases botched by
Bank of America.
In a statement, a Bank of America spokesman said that each
of the former employees’ statements is “rife with factual inaccuracies” and
that the bank will respond more fully in court next month. He said that Bank of
America had modified more loans than any other bank and continues to
“demonstrate our commitment to assisting customers who are at risk of
foreclosure.”
Six of the former employees worked for the bank, while one worked
for a contractor. They range from former managers to front-line employees, and
all dealt with homeowners seeking to avoid foreclosure through the government’s
program.
When the Obama administration launched HAMP in 2009, Bank of
America was by far the largest mortgage servicer in the program. It had twice
as many loans eligible as the next largest bank. The former employees say that,
in response to this crush of struggling homeowners, the bank often misled them
and denied applications for bogus reasons.
Sometimes, homeowners were simply denied en masse in a
procedure called a “blitz,” said
William Wilson, Jr., who worked as an underwriter and manager from 2010
until 2012. As part of the modification applications, homeowners were required
to send in documents with their financial information. About twice a month,
Wilson said, the bank ordered that all files with documentation 60 or more days
old simply be denied. “During a blitz, a single team would decline between 600
and 1,500 modification files at a time,” he said in the sworn declaration. To
justify the denials, employees produced fictitious reasons, for instance saying
the homeowner had not sent in the required documents, when in actuality, they
had.
Such mass denials may have occurred at other mortgage
servicers. Chris Wyatt, a former employee of Goldman Sachs subsidiary Litton
Loan Servicing, told
ProPublica in 2012 that the company periodically conducted “denial sweeps”
to reduce the backlog of homeowners. A
spokesman for Goldman Sachs said at the time that the company disagreed with
Wyatt’s account but offered no specifics.
Five of the former Bank of America employees stated that
they were encouraged to mislead customers. “We were told to lie to customers
and claim that Bank of America had not received documents it had requested,” said
Simone Gordon, who worked at the bank from 2007 until early 2012 as a
senior collector. “We were told that admitting that the Bank received documents
‘would open a can of worms,’” she said, since the bank was required to
underwrite applications within 30 days of receiving documents and didn’t have
adequate staff. Wilson said each underwriter commonly had 400 outstanding
applications awaiting review.
Anxious homeowners calling in for an update on their
application were frequently told that their applications were “under review”
when, in fact, nothing had been done in months, or the application had already
been denied, four former employees said.
Employees were rewarded for denying applications and
referring customers to foreclosure, according to the statements. Gordon said
collectors “who placed ten or more accounts into foreclosure in a given month
received a $500 bonus.” Other rewards included gift cards to retail stores or
restaurants, said Gordon and Theresa
Terrelonge, who worked as a collector from 2009
until 2010.
This is certainly not the first time the bank has faced such
allegations. In 2010, Arizona and Nevada sued
Bank of America for mishandling modification applications. Last year, Bank
of America settled
a lawsuit brought by a former employee of a bank contractor who accused the
bank of mishandling HAMP applications.
The bank has also settled two major actions by the federal
government related to its foreclosure practices. In early 2012, 49 state
attorneys general and the federal government crafted a settlement that, among
other things, provided cash payments to Bank of America borrowers who had lost
their home to foreclosure. Authorities recently began mailing out those checks
of about $1,480 for each homeowner. Earlier this year, federal bank regulators
arrived at a settlement that also resulted in payments to affected borrowers, though
most received $500 or less.
The law suit with the explosive new declarations from former
employees is a consolidation of 29 separate suits against the bank from across
the country and is seeking class action certification. It covers homeowners who
received a trial modification, made all of their required payments, but who did
not get a timely answer from the bank on whether they’d receive a permanent
modification. Under HAMP, the trial period was supposed to last three months,
but frequently
dragged on for much longer, particularly during the height of the
foreclosure crisis in 2009 and 2010.
ProPublica
began detailing the failures of HAMP from the start of the program in 2009.
HAMP turned out to be a perfect storm created by banks that refused
to adequately fund their mortgage servicing operations and lax
government oversight.
Bank of America
was far slower to modify loans than other servicers, as other analyses we’ve cited have shown. A study last year found that about 800,000 homeowners would
have qualified for HAMP if Bank of America and the other largest servicers had
done an adequate job of handling homeowner applications.
