St. Louis, MO: Bank of America (BoA) and BAC Home Loans Servicing are facing a potential class action lawsuit over allegations that they refused to participate in foreclosure prevention programs even though they had accepted $25 billion in financing from the federal government through the Troubled Asset Relief Program (TARP).
Lead plaintiff Susan Fraser claims that by taking the TARP funds BoA agreed to participate in at least one TARP—authorized program to minimize foreclosures. In April 2007, BoA signed a contract with the US Treasury stating that it would comply with the Home Affordable Modification Program (HAMP) to perform loan modifications and other foreclosure prevention services. The suit further claims that the HAMP program requires BoA to identify loans that are subject to modification; collect financial and other personal information from the homeowners to evaluate whether the homeowner is eligible for modification; institute a modified loan with a reduced payment amount as per a mandated formula that is effective for a three-month trial period; and provide a permanently modified loan to those homeowners who comply with the requirements during the trial period.
"Though Bank of America accepted $25 billion in TARP funds and entered into a contract obligating itself to comply with the HAMP directives and to extend loan modifications for the benefit of distressed homeowners, Bank of America has systematically failed to comply with the terms of the HAMP directives and has regularly and repeatedly violated several of its prohibitions," the complaint states.
The complaint also states, "Bank of America's delay and obstruction tactics have taken various forms with the common result that homeowners with loans serviced by Bank of America, who are eligible for permanent loan modifications, and who have met the requirements for participation in the HAMP program, have not received permanent loan modifications to which they are entitled."
The class consists of all eligible homeowners who have been serviced by one or both defendants who have not received a permanent modified loan. The class seeks an injunction and damages.