In 2012, Bank of America settled a lawsuit brought by a former employee of a contractor who worked with the bank. This employee had accused Bank of America of mishandling HAMP applications. The Bank has also settled two major Federal lawsuits related to improper foreclosures practices.
Consolidation of Lawsuits
The pending lawsuit against Bank of America is part of a consolidation of 29 separate suits brought against the bank. The lawsuits come from across the country and have been certified as a class action. The lawsuit deals with homeowners who received trial modifications, and made all of their payments on a timely basis. However these homeowners did not receive timely responses from the bank as to whether they would be given a permanent mortgage modification. Pursuant to the HAMP program, the initial trial period was supposed to last for three months. However with Bank of America, it often lasted much longer. The problem was that Bank of America, as well as other banks, refused to properly fund their mortgage servicing operations under the HAMP program. Unfortunately there was not sufficient government oversight of these programs to pick up these problems right away.
It is estimated there are 800,000 mortgages that would have qualified for HAMP mortgage modifications if Bank of America and other large financial institutions had properly funded the HAMP program and supervised the program in the manner in which it was intended. This program was intended to help homeowners during the mortgage crisis in America. Unfortunately, since it was a voluntary program that was underfunded, it did not accomplish its goal!
The Purpose Of The HAMP Program
The purpose of the HAMP program was for the government to give cash incentives to financial institutions to modify home mortgages pursuant to specific standards. This was supposed to provide a streamlined process to help the 4 million homeowners having difficulties in the United States. Instead of accomplishing its goal, Bank of America utilized this program as a means, pursuant to statements of former employees, to obtain as much money as possible from the struggling homeowners and then foreclose their homes. Under the program, buyers were supposed to make trial payments for three months. However in many instances, the trial payments lasted for as long as a year and sometimes even longer. After making as much as a year or more of trial payments, instead of the mortgage modification becoming permanent, the homeowners were denied mortgage modifications. To make matters worse, they then found they owed the difference between the amount of the payments under the trial modification and their original mortgage payments. The Bank of America employees, in statements they had given stated that many of them were given no training whatsoever with regard to the requirement of the HAMP program.