A New Billion-Dollar Problem for Bank of America?

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The brouhaha over mortgage servicing mishaps and snafus doesn't seem to be having much effect on Bank of America's (NYSE: BAC  ) share price, particularly with all of the drama surrounding the Federal Open Market Committee's meeting, which did a bit of market roiling all on its own.

However, a lawsuit under way in Boston, alleging that B of A deliberately derailed loan modifications offered under the government's Home Affordable Modification Program, as well as the underwhelming National Mortgage Settlement monitor's report released this week, have been attracting media attention.

Both of these issues are likely to have a negative effect on B of A's already tarnished customer-service reputation and might wind up costing the big bank additional wads of cash, if California state Representative Maxine Waters has her way.

HAMP incentive payments at issue
Waters, a ranking Democrat on the House Financial Services Committee, recently sent a letter to several government entities, including the Office of the Comptroller of the Currency, the Federal Reserve, and the Special Inspector General for the Troubled Asset Relief Program. Alerted by an article in Bloomberg concerning the homeowners' lawsuit, Waters notes that Bank of America was the recipient of $992 million in HAMP loan modification incentives -- not to mention the oodles of cash it was handed as part of TARP.

Of course, the current loan modification suit puts the spotlight squarely on B of A, but the report from settlement monitor Joseph A. Smith shows that each of the Big Four have had their problems in that area. Both Bank of America and JPMorgan Chase (NYSE: JPM  ) failed on two of at least 12 benchmarks used to assess the banks' progress on the settlement, and Citigroup (NYSE: C  ) and Wells Fargo (NYSE: WFC  ) were lax on one each. JPMorgan and Citi both had the good grace to admit their failures and declare that they were working on fixes; Wells and B of A had no comment, which, for the latter, may only make it look even less sympathetic in the public opinion.

Another lawsuit in the making?
It remains to be seen whether Waters' request will prompt any action. Her letter asks that servicers that "you have reason to believe" were involved in any fraudulent behavior regarding HAMP be investigated -- with B of A being specifically mentioned, of course, because of the testimony in Boston.

It is quite possible that all of the big banks might be on the agenda for another mortgage-related investigation, courtesy of the U.S. government. While it is interesting that a senior member of the HFSC had to depend upon the mass media to hear of these allegations, both the monitor's report and the shocking revelations being aired in a courtroom in Boston show that the big banks really have only themselves to blame for being constantly under scrutiny.

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Read/Post Comments (5) | Recommend This Article (2)

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  • Report this Comment On June 20, 2013, at 12:49 PM, fjfisher601 wrote:

    The government should demand the Billions they received for this program be re-aid ! For B of A to keep the money is nothing less than corporate thievery no different than how Organized Crime used to function.

  • Report this Comment On June 20, 2013, at 1:45 PM, ArtistAtLarge wrote:

    Amanda, I wish I could wave a magic wand and have everyone speak the truth. I too have been a victim of BOA but it goes way beyond what you have written. After 2 attemps to MODIFY, BOA simply sold our loan to M&T Bank in New York. Then it was the same nighmare. Bayview Financial Services in Florida handles their delinquencies and foreclosures and it is truly a mill. We have been Modded and then denied in the course of two years and forced to accept an in house mortgage that is at 6.25% and $100.00 more than what our original loan was. How is this making my house affordable. HAMP hasn't a clue and the not watching. I personally contacted HUD and the State Attorney's General Office and started an investigation of their practices. Unfortunately nothing has come of it except that everyone I have delt with in the past 2 years (at Bayview) has been let go or moved into management positions with substantial raises. Time for a good reporter to start looking into some of the smaller housing mills....please. Start asking for these fired employees to come forward like they have at BOA. And keep up the good reporting

  • Report this Comment On June 20, 2013, at 4:01 PM, kenthedem wrote:

    "Her letter asks that servicers that "you have reason to believe" were involved in any fraudulent behavior regarding HAMP be investigated"

    Sounds fair...but how about adding that "any borrower that the bank has reason to believe of having lied on their loan application be investigated as well" (the "loan liars" as Senator Chris Dodd so aptly named them).

    Not would that get Ms. Walters any votes?

  • Report this Comment On June 20, 2013, at 4:54 PM, hwyman1968 wrote:

    I have been a victim of BOA who sold my loan to M&T Bank last year. I fought with BOA for almost a year for them to fix my mortgage after they finaly agreed with me that they messed up! Instead of fixing the problem they offered me a loan modification. I told them I do not want a loan modification I just want my loan back to the way it was before you bought if from Countrywide.

    This went on for over a year and I didn't go through a loan modificaton and when it was all good I was told that we can't put your loan back to the ay it was because you were late with your payment and you are enrolled in a loan modification program and will have to wait until the paperwork gets process"

    at one point they threatened to place my home in forclosure if I didn't pay them late fees and other admistrated fees along with the "unnessacary loan payment screw up on thier part"

    When I pushed back stating that you are after my home plain and simple they denied the whole thing. When I continued to question them and I asked to speek with the underwriter I was then told by multiple represenatives that "we are no longer servicing your loan as of Aug 2012 and we can't tell you who it is at this tme you will have to wait for the official letter'

    At one pount I was actuly told by a rep "that if I paid my bills on time I would not have these problems with my loan." What nerve and disrespect! BOA needs to be forced to pay back all the $1000's of dollars in fees that they collected from me for thier mistakes!

  • Report this Comment On June 20, 2013, at 5:05 PM, MarineMom97 wrote:

    I will be glad when someone check into WellsFargo. Try Loan Modification 3 times. I was told call back when I get behind. "I stated, so you all can take my house?"

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