Bank of America sued for not modifying mortgages

NEW YORK Tue Mar 23, 2010 2:09pm EDT

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NEW YORK (Reuters) - Homeowners have sued Bank of America Corp for allegedly reneging on a promise it made to modify troubled mortgages as a condition of accepting $25 billion of federal bailout money.

In a lawsuit filed Monday in Seattle federal court and seeking class-action status, two Washington residents allege the largest U.S. bank puts its own financial interests ahead of obligations to help struggling homeowners.

According to the complaint, Bank of America agreed to take part in the Treasury Department's $75 billion Home Affordable Modification Program, known as HAMP, because it accepted bailout funds from the Troubled Asset Relief Program.

But the complaint said Bank of America had an incentive not to modify loans because doing so might cause it to repurchase more loans, collect lower servicing fees, or assess lower default charges because fewer payments would be deemed late.

As a result, Bank of America "has serially strung out, delayed, and otherwise hindered the modification processes," leaving thousands of borrowers "often worse off than they were before they sought a modification," the complaint said.

The plaintiffs Kamie and Daniel Kahlo alleged that they sought to modify their mortgage after their annual income fell to $20,000, too low to cover their $1,460 monthly payments.

They said Bank of America advised them to become delinquent so they would qualify, and that they then signed an agreement to cut their monthly payments almost in half.

Nevertheless, they alleged that despite their making the lowered monthly payments, which were cashed, Bank of America served them with a default notice and failed to provide final modification documents.

A Bank of America spokeswoman declined to comment, saying the bank had not been served with the lawsuit. The Charlotte, North Carolina-based lender has repaid the $25 billion of bailout money.

The complaint seeks class-action status, an order for Bank of America to perform its obligations under HAMP, compensatory and other damages, and other remedies.

The case is Kahlo v. Bank of America NA et al, U.S. District Court, Western District of Washington, No. 10-00488.

(Reporting by Jonathan Stempel; Additional reporting by Joe Rauch in Charlotte, N.C., editing by Matthew Lewis)

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Comments (6)
UNDERGROUND wrote:
These global financial empires like Bank of America have become masters at schemes in our country against individuals. The solution in my opinion is the following: There’s only one way to effectively rid our country of corrupt financial empires. And the answer is to not own even one share of stock in these financial empires and not have even one penny of deposits at this bank. Without shareholder capital and without a deposit base, the bank is not a bank anymore because a bank needs money. The government is virtually useless against the financial empires schemes, level of sophistication and skills in corporate bureaucracy and corporate jargon. I hope these people win a large sum of money from the lawsuit. We need more people like Kamie and Daniel to stand up to these crooked global financial empires in our country. We must back and support our fellow Americans who have the guts to confront global financial empires. In my opinion, Bank of America is a bad investment both short term and long term, since there is no value at Bank of America. Especially when the bank relies on government bailouts and schemes to stay afloat. My recommendation on the stock is sell.

Mar 23, 2010 3:04pm EDT  --  Report as abuse
jstaf wrote:
Bank of America is too big to fail or succeed in the mission of a component of the financial system, and this is what free market , unregulated banking wrought, poorly run businesses that we have to bail out of their failures while paying the failed millions.

Mar 23, 2010 3:46pm EDT  --  Report as abuse
MeeVee wrote:
It would just have been better if they (not just BofA) didn’t approve loans that people couldn’t repay. Period. End of Story.

If you cannot repay a loan, DO NOT GET ONE!

Mar 23, 2010 5:32pm EDT  --  Report as abuse
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