Allegations of Homeowner Abuse Won't Help Bank of America Regain Mortgage Business
Jun 17th 2013 10:35AM
Updated Jun 17th 2013 11:45AM
Once again, Bank of America finds itself in court over mortgage-related complaints. This case, being heard in federal court in Boston, involves a group of homeowners who claim that their requests for loan modifications under the federal Home Affordable Modification Program were denied -- often fraudulently -- or ignored.
The case features six former Bank of America employees, as well as a B of A contractor, each of whom allege deceit on the part of the bank when dealing with those trying to refinance their troubled loans. Some of these charges being aired are downright explosive and go straight to the heart of public sentiment toward the bank.
It also sparks the question: What effect might this publicity have on B of A's new push to get back into the mortgage market?
Lies, and more lies
The testimony so far has been shocking, as former employees recount lying to clients under orders from above. Homeowners were told that paperwork was not received when in fact it had been, and payments made during loan modification trial periods were similarly obstructed. Workers were also instructed to doctor records, knowing that non-compliance or complaining would likely result in loss of employment.
Similarly, Bank of America employees who helped clear the decks of pesky refinance documents were given cash and gift cards as bonuses. One former loan manager said that workers engaged in a bimonthly "blitz," whereby any applications older than 60 days were flatly denied. Often, managers tried to induce rejected customers into taking out a pricier bank loan, instead.
While some details are new, the charges are not. Two whistleblowers, one that worked at Countrywide, and another that worked for a lending unit under contract with B of A, have made similar allegations in the past. Nor has this behavior been limited to B of A and fellows Citigroup , JMPorgan Chase , Wells Fargo , and Ally Financial, the signatories of the $25 billion National Mortgage Settlement. Last year, a former employee of Litton Loan Servicing told ProPublica how that company, working for Goldman Sachs , routinely engaged in "denial sweeps," in order to reduce the backlog of cases.
Still a problem
A Bank of America spokesman called the testimony "rife with factual inaccuracies." It isn't difficult to find evidence of B of A's history of customer complaints regarding mortgage modifications, however. The Consumer Financial Protection Bureau has logged around 18,000, and the state of Florida is considering filing suit against the bank over its own burgeoning list of borrowers registering their grievances. A recent article spotlighting the lethargy with which the fraudclosure signatories have been assisting homeowners featured a consumer's trials and tribulations while attempting a loan mod with B of A.
A glance at the website consumeraffairs.com shows that, of over 90 mortgage lenders, Bank of America has topped the list in number of complaints. Add B of A's to that of Countrywide, which is also listed, and the big bank stands head and shoulders above the others. In its favor, the bank does participate in trying to resolve problems received by the website. Interestingly, Litton has a fair number of gripes lodged against it, too.
Publicity won't bode well for B of A's mortgage push
This whole mess is disappointing, to say the least, and not only because of the distasteful manner in which the bank treated the most vulnerable of mortgage customers. This behavior is sure to make things more difficult for Bank of America as it tries to regain its share of the mortgage market. B of A has put much consideration and money toward this new program, which so far seems to be working well. But, negative publicity like this could scuttle this plan, reversing any gains that the bank has so far been able to achieve. After all CEO Brian Moynihan's hard work and planning, that would be a shame, indeed.
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The article Allegations of Homeowner Abuse Won't Help Bank of America Regain Mortgage Business originally appeared on Fool.com.Fool contributor Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends Bank of America, Goldman Sachs, and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.