Ex-Employees Allege In Court That Bank Committed Fraud In Foreclosure

fraud-in-foreclosureEx bank employees shed new light on the loan modification process and fraud in foreclosure

Several former Bank of America employees filed declarations in a federal court last week claiming that the mortgage lender told them to lie to customers seeking loan modifications and to commit fraud in foreclosure.  Bank of America denies the claims; however it is  worth noting that Bank of America was among five mortgage servicers that reached a $25 billion settlement with state and federal regulators last year to resolve similar allegations of fraud in foreclosure practices.


Moreover, many former homeowners have shared their horror stories of the modification process where the lender strings them along asking for needless documents, losing documents, making borrowers start over after re-assigning employees, and in other ways stalling for time until their homes were foreclosed.  Former Bank of America employees allege that this was a deliberate scheme to deny loan modifications and steer financially troubled customers into refinancing or foreclosure.  The employees say they got bonuses for denying as many loan modifications as possible. And for putting homes into foreclosure, they say Bank of America rewarded them with gift cards to Target and Bed Bath & Beyond.


The accusations in the complaint are outrageous.  In the former employees’ own words under penalty of perjury:

1)  “Although I was called a “Home Retention Specialist,” my job was to collect as much money as possible from homeowners,” said Recorda Simon, who worked at Bank of America’s call center in Fort Worth, Texas, from August 2010 to January 2011.

2)  “We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had),” said Simone Gordon who worked at Bank of America from July 2007 to February 2012. “A collector who placed ten or more accounts into foreclosure in a given month received a $500 bonus. Bank of America also gave employees gift cards to retail stores as rewards for placing accounts into foreclosure.”

3)  “I saw records regarding hundreds of homeowners that Bank of America treated dishonestly,” said Erika Brown, who worked at Bank of America from June 2009 through June 2010. “The homeowners were eligible for loan modifications under HAMP, sent back all the required documents, and made all their required payments. Bank of America nevertheless damaged their credit ratings by reporting them delinquent, tacked on additional charges to their loans, increased the amounts it considered as being owed and often referred these homeowners to foreclosure.”

4)  “I told my supervisors these practices were ridiculous and immoral,” said William E. Wilson Jr., a team manager for Bank of America from June 2010 through august 2012, in Charlotte, N.C. “We were instructed to delay and then push homeowners to accept an internal refinance so that Bank of America would profit. Once an applicant was finally rejected after a long delay, the bank would offer them an in-house alternative. Bank of America would charge a higher interest rate, ranging up to 5%, as compared to 2% if the loan had been modified under HAMP.”

5) “The numbers Bank of America were reporting to the government and to the public were simply not true,” said Steven Cupples, an underwriter who worked at Bank of America until 2012. “Employees who challenged … the ethics of Bank of America’s practice for any reason were fired.”

6) “Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications, while leading the public and the government to believe that it was making efforts to comply with HAMP,” said Theresa Terralonge, who worked for Bank of America from June 2009 to June 2010.


The Home Affordable Modification Program, or HAMP, was established in 2009 and has largely been seen as a failure because of the limited number of loan modifications completed, about one forth that predicted by the programs proponents, but if the actions alleged were typical there is no wonder why the program was not more successful. Of nearly $30 billion in bailout funds allocated to housing programs, including HAMP, the Treasury has only spent about $5.2 billion. By contrast, Bank of America, alone, has received tens and tens of billions in bailout funds and loan guarantees since the financial crisis began.  HAMP was set to expire at the end of the year. but the feds have recently announced plans to extend it for another two years because of the still great need. Hopefully there will be additional safeguards to make sure it is evenly implemented.

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