Homeowners Accuse Bank Of America Of Racketeering In Lawsuit Over Mortgage Modifications

Following the recent revelations from former Bank of America employees that the nation’s most-hated financial institution allegedly engaged in deliberate schemes to delay and deny mortgage modifications, a group of three homeowners have sued BofA, alleging violations of federal anti-racketeering laws.

In those statements from former employees, given under oath as evidence in a separate Massachusetts lawsuit against BofA, ex-staffers claim that bank executives told employees to delay the modification process, and that modification applications (and required documents) were routinely “lost” in order to slow the process down. The goal, claim some former employees, was to push homeowners either toward foreclosure or into a new BofA mortgage with an interest rate significantly higher than the borrower would have received through the federal HAMP program.

The plaintiffs in the new case, all of whom had sought mortgage modifications from BofA through HAMP, claim that this alleged scheme violates the federal Racketeer Influenced and Corrupt Organizations Act (which you probably know better as RICO), pointing out that the bank’s plan was a nationwide conspiracy using “interstate mails and wire communications” to prevent “as many homeowners as possible from obtaining permanent loan modifications that complied with HAMP while allowing BOA to maintain the appearance to regulators and the public of trying to comply with its HAMP obligations.”

From the complaint: “To accomplish its objectives, BOA created a widespread RICO enterprise to defraud homeowners who sought modifications and then acted as the kingpin of that enterprise.”

The suit also names Urban Lending, a third-party company hired by BofA to handle some of its HAMP paperwork. In the statements provided by former employees in the Massachusetts case, employees alleged that borrowers would send documents to Urban but that these documents would then be deliberately “lost.”

“Consumers were led to believe that they were dealing with BOA, when secretly they were communicating with Urban,” reads the complain. “As part of the loan-modification scheme and enterprise, Urban became a ‘black hole’ for documents sent by homeowners.”

Bank of America, which has denied the statements given in the Massachusetts case (but which has not actually issued a rebuttal of the claims) says that it intends “to provide conclusive evidence that these allegations are demonstrably false and devoid of any factual support. Our practice is to foreclose as a last resort when other available options to help keep people in their home have been exhausted.”

UPDATE: Shortly after posting this story, Bank of America filed a document in the Massachusetts case that attempts to discredit the statements given by the former employees.

Bank of America accused of racketeering in lawsuit [Charlotte Observer]