Bank of America's (BAC) persistent failure to modify home loans has resulted in the inevitable: a consumer class action.

Last week, Susan Fraser of Missouri filed suit on behalf of herself and all similarly situated Missouri homeowners: People who Bank of America failed to give permanent loan modifications to, even though the homeowners were qualified. Fraser's story, detailed on pages 20 through 24 of the complaint, includes all the features now common in modification horror stories.

As of publication, BofA had not returned a request for comment on the suit.

UPDATE: Shortly after publication of this article, BofA replied via email to DailyFinance's request for comment: "Given that we have just become aware of this lawsuit, we don't have a comment on it. Generally, Bank of America has helped 746,000 customers achieve more affordable and sustainable payments through modified loans since January 2008, and more than a quarter million modifications have been completed by Bank of America so far this year."

Bank Told Her to Default

According to the complaint, Fraser reached out to BofA while she was still current on her mortgage, but falling behind seemed inevitable. Her employer was doing poorly in the recession, and her income was down sharply. Her son had been diagnosed with cancer, triggering unexpected financial costs. Finally, she had recently divorced, increasing her costs of living. But since she was still current on her mortgage, BofA told her to default and then ask for a modification.

According to the complaint, she skipped two payments and then resumed paying her mortgage. Fraser was told she qualified for a modification, but never received the paperwork for one. For the next several months, Fraser called BofA and got nowhere. Instead, she began to received default and foreclosure notices. Six months after seeking the modification and being told to by the bank to default, a BofA rep told Fraser that nothing had been done with her file to get her a modification. Shortly thereafter, she received notice that foreclosure was imminent.

According to the complaint, a few weeks after that, she got a trial modification agreement, which she signed and returned. Over the next year, she consistently made the modified payments, but continued to receive disturbing notices from BofA saying she was in default, and reflecting her original payment amount. Each time she asked, BofA told her to make the modified payments and ignore the notices. Eventually, she was told she would have to execute a new trial agreement, which she did and has complied with. BofA still has not made the trial modification permanent, however.

The Class Claims

The lawsuit charges that Bank of America has "serially strung out, delayed and otherwise hindered the modification processes" and has "left thousands of borrowers in a state of limbo -- often worse off than they were before they sought the modification." The complaint accuses BofA of having "put processes in place that are designed to foster delay, mislead homeowners and avoid modifying mortgage loans." For example, the suit says BofA commonly encourages or requires borrowers to resubmit financial information every time they call to ask about the modification's status, and any changes in that information, even small ones, trigger BofA to "restart the application process."

The suit claims BofA teaches its customer service representatives to lie to the customers. BofA allegedly instructs its representatives to tell borrowers that documentation was late or not received, even when it was received in a timely manner, and to say documents were sent to borrowers when they weren't. BofA also allegedly fails to update its computer system to reflect the modifications, so that loans are treated as delinquent and foreclosures pursued when they shouldn't be.

One tactic, says the lawsuit, is to apply the modified payments to accumulated fees, so that the remaining payment is deemed "insufficient," and to otherwise misaccount for the payments so that homeowners making timely modification payments are treated as if they continue to be delinquent.

Claims Align With Anecdotes

Other anecdotes beyond Fraser's suggest that these claims aren't baseless. As I've reported, one judge was so frustrated with Bank of America's failure to permanently modify a mortgage in Vermont that he ordered BofA to do it. That case showed how poor BofA's loan data is: An email from the bank's attorneys supposedly about the homeowner's trial modification history was wrong in every detail.

Countless stories beyond my reporting detail homeowners unable to get straight answers from their banks, including BofA -- stories of having to repeatedly resubmit paperwork, and of homeowners being foreclosed on despite being current with their modified loan payments.

Challenging Legal Road

Even if every claim against BofA is true -- and they essentially boil down to BofA intentionally pretending to be willing to modify mortgages in order to milk thousands of additional dollars from struggling homeowners before foreclosing on them as it had always intended to do -- Fraser and the others won't get anything unless the bank's behavior violates the law.

One legal basis asserted by Fraser for the suit is BofA's violation of the terms of its contract with the Treasury Department to do HAMP modifications. Because Fraser and other homeowners weren't signatories of that contract, the only way they can sue to enforce it is if the judge decides the contract is specifically for their benefit. A California judge has already made a similar ruling, as colorfully discussed on the blog MandelmanMatters, but that doesn't mean every judge will see things the same way.

Plaintiffs also point to the trial modification agreements and claim BofA's conduct violates those contracts. Presumably, that's an easier case to make, but if it was so easy, I'm not sure that plaintiffs would offer two theories of how the contract formed -- which they do.

Finally, the plaintiffs make a variety of common law and state law claims. Perhaps those will be straightforward to prove.

In any case, filing this complaint is just the start of a long road. Surely BofA will try to get the suit dismissed. If that succeeds, and plaintiffs see a path forward, surely they will refile. If they survive the next motion to dismiss, BofA will respond to the complaint, then seek another dismissal, and so on and so on for years.

A Revolution in the Making?

The plaintiffs are, of course, asking for monetary damages but also for the judge to order changes to BofA's practices that would revolutionize the loan modification process. Should that occur, it would be much more likely that homeowners could modify their loans, stay in their houses and protect neighborhoods and states from an even higher toll of mass foreclosures.

If only it didn't require a revolution to make BofA comply with its own trial modification agreements and the federally mandated terms of the HAMP program.

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We have been working with Bank of America for over two years on this modification procces .We have given them all the paperwork necessary. We have given them the paperwork over and over and over. I'm just so tired of dealing with it . I stumbled upon this website today and am realizing I'm not the only one going through this With Bank of America. We have proven that we qualify for this more than once but still no answers. The attorney I talked to said that they will postpone postpone postpone until you get to the point you are so far behind on your mortgage that the only thing you can do is Foreclose. We have been in this house for 13 years and raised our kids here all we want is a lower mortgage rate so that we can afford to stay here. Through the 13 years our mortgage has gone up and up it's out of range at this point. So because of this I am going to look into what I can do and hopefully save my home. Why is it the banks feel like they can do this to us. We are what keeps them going. I have proven over 13 years that I have been able to make my mortgage payments until recent economy.

June 20 2013 at 12:41 PM Report abuse rate up rate down Reply
Mandy Agler

Same here! Been going through a mod for 7 months now and they keep losing our paperwork! excuses! We have done everything and now we are involved with an attorney! This should be illegal what they are doing I hope we can get somewhere now that we have to dig up even more money that we dont have for a lawyer!

The Agler family of Washington, MO

June 20 2012 at 5:40 PM Report abuse rate up rate down Reply

I am in the same situation. I tried for a loam mod for three years since my husband passed. submitted the same paperwork over and over. Each time I call the same thing. No paperwork, lost or put on hold until the phone goes dead.Now I am in forecloser, with a court date set and nowhere to go. BofA should be put out of business. It would be nice if someone from SD could be put in the lawsuit.

November 29 2011 at 10:43 AM Report abuse rate up rate down Reply

Why refinance and pay fees which will add to your loan balance, when you can get a loan modification for free? With a loan modification there are no closing costs, you can lower your rate to 2%, you don't need any equity in your home, you could get a principal reduction, your credit score has nothing to do with qualifying for a loan modification, bankruptcy does not matter, foreclosure does not matter, and you can apply yourself and structure the loan modification to give you the lowest possible payment.

Learn how to apply for a loan modification and structure it to give you the best deal: There is a book called "Loan Modification Secrets" that you can get if you go to Google eBooks or it is also at Amazon which will show you how you can apply and structure your loan modification. good luck!

September 05 2011 at 10:40 PM Report abuse rate up rate down Reply
F Lee Johnson

I have my home loan through Bank of America and they are gining me the same trouble. is there anyway I can be added to the lawsuit?

August 21 2011 at 10:58 PM Report abuse rate up rate down Reply
Craig A

They have messed with us over and over since we applied for a Modification, we did everything they told us and we have sold everything to stay on our mortgage. We paid them our escrow and the partial of payments that was added after the mod trial then when taxes came due they did not send our tax money and cant seem to find it now they automatically added a escrow on our acct that we did not want! We like our payment where we dont have to worry every month and pay our taxes at tax time, THEY WANT US TO STRUGGLE IN HOPES THEY CAN GET OUR HOUSE. I have numerous phone records hours upon hours on the phone all mislead information everytime. Missouri needs to open the lawsuit! File complaint with attourney generals office and it will come sooner or later. I found out there are several stories like mine over the MODIFICATION MESS!

August 18 2011 at 2:52 AM Report abuse rate up rate down Reply

How is BofA even still in business? Just like RS, my brother's initial mortgage on his house was through Countrywide. then his mortgage was purchased by BofA... they stopped paying his home owners insurance (which was escrowed). my brother only found out that BofA had purchased the loan when his insurance agent called him about the cancellation of his home owners policy. Then, I guess BofA is wrapped up in a lawsuit, and my brother had made three payments to Countrywide before he realized BofA is who had the payments. For the past year and a half, my brother has provided proof that he paid Countrywide, he has the cancelled checks, etc., and they are still threatening foreclosure, even though he has caught up to being only one month behind. HE IS NOT BEHIND... he has the cancelled checks to prove it, but when BofA looks at this documentation, they say it's too bad... the money is tied up in the lawsuit, and until that is settled, then he can either catch up on his mortgage or they will foreclose!! I mean, really, how can one of the biggest banks run their business like this. They should be all over the news every night for their shady practices!! It's time someone stands up to them!!

August 12 2011 at 2:16 PM Report abuse rate up rate down Reply

BOA are criminals. I had a loan modification with Countrywide. Made all payments accordingly, then BOA started sending payments back,said they were wrong amount. BOA Customer service said "we have no record of you ever making a payment for 20 months"??? My response " You stupid B#$%*&^%s why do I have cancelled checks??" Now I've sent modification DOCS three times and they keep asking for the SAME THING OVER &OVER I hope AIG gets the 10 Billion they're suing for!!

August 08 2011 at 6:26 PM Report abuse rate up rate down Reply

Anyone know if it is possible to join this class action suit for an IL loan?? The stories listed are all too familiar, someone has to make B of A responsible for these horrendous practices.

July 07 2011 at 5:38 PM Report abuse rate up rate down Reply

i have sent the same documents into bofa 3 seperate times
since initiation of loan mod request in july 2010. the last time i hired a lawyer to meet the deadline request of feb 11 2011 to send in same paperwork that had already been sent 2 other times. received my answer today. loan mod denied because even though my lawyer faxed and fedexed them the required documents 3 weeks before deadline , they didnt receive them. ive got them by the balls now and intend to sue these assswholes for everything i can

March 04 2011 at 5:30 PM Report abuse rate up rate down Reply