As we’ve previously reported, Bank of America’s loan modification program (for want of a better phrase) is being sued by the state of Arizona. But the AZ Attorney General says the nation’s second-largest bank is hindering his investigation by quietly negotiating settlements with underwater homeowners — or at least those who will pledge to keep their mouths shut about the bank.

BusinessWeek writes of one settlement in which the borrower, who defaulted on a $253,142 mortgage, had that loan modified to a 40-year loan with a sweetheart 2% interest rate.

For that admittedly awesome deal, the homeowner agreed to “remove and delete any online statements regarding this dispute, including, without limitation, postings on Facebook, Twitter and similar websites,” and to refrain from making statements “that defame, disparage or in any way criticize” Bank of America.

The Arizona Attorney General’s office, which claims knowledge of at least a dozen such settlements, has asked a court to compel BofA to turn over these agreements and to block the non-disparagement clauses. A hearing is set for Feb. 1.

“These agreements have completely silenced even the most communicative consumers,” writes Assistant Attorney General Carolyn Matthews in the state’s court filing. “The settlement agreement purposefully makes it impossible, legally and practically, for a consumer signing it to come forward, voluntarily and promptly, to provide evidence in this case.”

Lawyers for BofA defend the non-disparagement clauses, telling BusinessWeek that the bank will not enforce the provision if those who signed the settlements choose to speak to investigators for the state.

Bank of America Settlements Impede Fraud Probe, Arizona Says [BusinessWeek.com via ThinkProgress]

Thanks to Steve for the tip!

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