Bank of America whistleblowers say they were told to lie about mortgages

Tuesday, July 30, 2013 by: J. D. Heyes
Tags: Bank of America, housing bubble, home foreclosures

(NaturalNews) Americans still reeling from the collapse of the U.S. housing market and who lost homes or tens of thousands of dollars in equity are going to be especially upset by news that one of the lenders at the heart of the collapse, Bank of America, is guilty of fleecing borrowers and rewarding foreclosures.

According to BoA employees-turned-whistleblowers who have signed sworn statements attesting to the validity of their accusations, "Bank of America employees regularly lied to homeowners seeking loan modifications, denied their applications for made-up reasons, and were rewarded for sending homeowners to foreclosure," investigative journal ProPublica is reporting.

The statements were filed in mid-June in a Boston federal court as part of a multi-state class-action lawsuit brought by homeowners who attempted to avoid foreclosure via the Home Affordable Modification Program (HAMP), a government program, but say their cases were botched by BoA.

Homeowners denied en masse

As expected, BoA is officially denying any wrongdoing, with a spokesman telling ProPublica that to a person, the former employees' claims are "rife with factual inaccuracies," adding that the bank planned to address the accusations more fully in July.

The spokesman, who was not identified by name, went on to say that BoA was responsible for modifying more loans than any other U.S. bank, and that the financial institution is continuing to "demonstrate our commitment to assisting customers who are at risk of foreclosure."

A half dozen former employees actually worked for BoA, while one worked for a contractor. "They range from former managers to front-line employees, and all dealt with homeowners seeking to avoid foreclosure through the government's program," ProPublica reported.

When HAMP was launched by the Obama Administration in 2009, the housing collapse was still ravaging the U.S. economy and homeowners. At the time, BoA was, by far, the largest mortgage servicing institution in the program, with twice as many loans eligible as the next largest institution.

According to the former employees, BoA - besieged with a rush of panicked homeowners - the bank would often either mislead them or deny their applications for bogus reasons.

William Wilson, Jr., an underwriter and manager for BoA from 2010 to 2012, said at times large groups of homeowners were denied at once via a procedure called a "blitz." Per Pro Publica:

As part of the modification applications, homeowners were required to send in documents with their financial information. About twice a month, Wilson said, the bank ordered that all files with documentation 60 or more days old simply be denied.

"During a blitz, a single team would decline between 600 and 1,500 modification files at a time," he said in his sworn statement. In order to justify such mass denials, employees devised fictitious reasons for the rejections, such as claiming that the homeowner had not filed the appropriate paperwork when they really had.

Mass denials like these may also have occurred at other financial institutions, the report said.

Chris Wyatt, formerly of Goldman Sachs subsidiary Litton Loan Servicing, told Pro Publica last year that the firm sometimes conducted "denial sweeps" of applicants, to reduce backlogs. At the time, a Goldman Sachs spokesperson denied Wyatt's claims but offered nothing to refute him.

Still 'too big to fail'

Of the whistleblowers, five said they were encouraged to mislead customers.

"We were told to lie to customers and claim that Bank of America had not received documents it had requested," said Simone Gordon, an senior collector at the bank from 2007 until early 2012. "We were told that admitting that the Bank received documents 'would open a can of worms,'" she added, noting that BoA was required to underwrite applications within 30 days of receiving homeowners' documents, but that the bank did not have adequate staff for the task.

"Wilson said each underwriter commonly had 400 outstanding applications awaiting review," ProPublica reported.

Added Salon.com:

In reality, Bank of America used [the program] as a tool, say these former employees, to squeeze as much money as possible out of struggling borrowers before eventually foreclosing on them.

Despite so-called financial reforms passed in the wake of the housing scandal, BoA and others remain "too big to fail" (http://www.ft.com).

Sources for this article include:

http://www.salon.com

http://www.propublica.org

http://www.ft.com