Bank of America Hit With Another Scandal

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Bank of America Scandal

Source: Reuters

Former Bank of America employees are coming out to tell the world that the massive bank, already hit with countless lawsuits and scandals, gave gift cards as employee incentive for lying to homeowners about their mortgages. The six former BoA employees allege the bank deliberately denied home owners loan modifications – even when they were eligible for those options. They say they were told to lie to those customers about the status of their mortgage payments and documents. The foreclosures continued to pile up, even as other employees who didn’t want to play along were fired or otherwise released from their jobs.

As a result, they say, the bank then was able to push foreclosures because the homeowners were being led to believe they had no other choice. Some weren’t even at the foreclosure level, yet were still served papers. Some homeowners were able to take a different route, one that included in-house loan modifications. Both proved highly profitable, more so than the government-sponsored Home Affordable Modification Program. All of this comes to the surface as a result of a lawsuit in Massachusetts federal court, initially filed by former customers. Former employees from around the nation are coming together for the massive lawsuit in order to testify on behalf of those former customers.

Hitting the Target

The lawsuit claims that customer service reps who were able to push foreclosures through were rewarded with Target gift cards, Bed Bath & Beyond gift cards and others. Instead of cash, they bonuses came in the form of these gift cards. If an employee foreclosed ten accounts in a thirty day period, he could expect to be rewarded with the gift cards. For those employees who had a different moral structure, they often faced punishment – up to and including discharge – for not hitting the quotas.

A bi-monthly “blitz” occurred and allowed the bank to clean out its Home Affordable Modification Program, or HAMP. The bank “blitzed” the files where it unceremoniously declined HAMP requests, sometimes because the documents were more than five years old. The lawsuit also includes testimony from those employees who say the bank lied to government officials and falsified information given during various investigations. The documents insisted the bank had provided many HAMP modifications – and nearly all of the cases show that it did not.

Bank of America Eavesdropping

The court documents include stories that managers would roam the floors with headsets that had the ability of picking up conversations on any call. Those employees were told to lie to homeowners. They were told to tell them that they’d yet to receive any kind of documentation from that customer, even when the employees knew that they had.

This is exactly what’s been happening to homeowners for years,

said Danielle Kelley, a Florida foreclosure attorney. She also said that regardless of how many times they sent the paperwork or how they maintained their payments, they were unable to secure the loan modifications but instead were hit with foreclosure notices.

Meanwhile, once the HAMP applications were declined and the customers were notified, the bank would take on the role of “hero” and begin offering in house options, sometimes charging more than double the interest rate for a loan that could have been included in HAMP at a very low 2 percent rate.

Bank of America Brief Presser

For its part, the bank continues to feed the media statements like this, from Rick Simon, a Bank of America Home Loans spokesman:

We continue to demonstrate our commitment to assisting customers who are at risk of foreclosure and, at best, these attorneys are painting a false picture of the bank’s practices and the dedication of our employees,

Simon said in an email, adding the declarations were “rife with factual inaccuracies.” He insists his bank has “successfully completed more modifications than any other servicer under HAMP”.

In one area of the lawsuit, a former employee claims he told his managers that the policies were immoral and ridiculous, only to be filed within a week. It’s just one of many personal anecdotes the lawsuit includes.

The lawsuit was initially filed in 2010 and it’s on its way to becoming more of a class action suit. It includes many affidavits, most dated over the past few weeks – suggesting the lawsuit is about to take a nasty turn for the bank – and include accusations that perhaps the bank isn’t expecting.

Government’s Fault

Remember, Bank of America continues to insist the government forced it to buy out Countrywide in 2008, just before the recession kicked in (along with JPMorgan Chase’s insistence that it too was forced to buy out Bear Stearns around the same time). BoA paid more than $42 billion already to settle many different credit card suits and mortgage related suits – and that’s just been in the past two years alone. That also doesn’t include the landmark settlement of $25 billion that it and the nation’s other big banks were ordered to pay to settle a mortgage “robo signing” scandal. In that case, employees were heard and they say they were forced to sign foreclosure documents with absolutely no verification.

CFPB: 18k Complaints

You’d think things would have gotten easier, but instead, many of these banks and most certainly Bank of America continue to be hit with massive lawsuits – and the banks are losing these suits. Over the past year alone, close to 20,000 homeowners and former customers have filed complaints with the CFPB. To say the bank has an image problem is a significant understatement; in fact, many are wondering just how long it can continue to operate in such a manner. Most of the complaints have to do with HAMP, the program designed to handle what the Obama Administration referred to as the “foreclosure epidemic”, but there are plenty more surrounding bank accounts, credit cards and convenience fees, too.

What are your thoughts? Is it time for drastic changes for the troubled bank or should it just take nature’s course, eventually imploding from its own bad decisions?

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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