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Unsealed documents claim BofA committed fraud in HAMP loan modifications

News has been plentiful over the past few years on difficulties that homeowners have experienced in seeking loan modifications under the Home Affordable Modification Program. This blog has discussed issues that homeowners had due to so-called "dual tracking" problems among the nation's mortgage lenders during the modification process. Those stories highlighted issues where the banks seemed to have one department pursuing foreclosure proceedings, while a separate division was working on a HAMP modification.

On Wednesday, a federal lawsuit filed under the False Claims Act against Bank of America was unsealed. That lawsuit alleges that BofA, or one of its subsidiaries, may not have had such clean hands in the so-called dual tracking cases. A man who worked for a company that the giant bank contracted to perform duties in HAMP cases says that the mortgage lender may have implanted programs to intentionally misled consumers in order to protect the bank's bottom line, according to the recently revealed court documents.

The worker says that he worked alongside bank executives who installed practices while dealing with HAMP modifications that were "designed to intentionally prevent scores of eligible homeowners from becoming eligible or staying eligible for permanent HAMP modification," according to the federal lawsuit.

The worker says that the bank also pretended to lose paperwork, which got in the way of a successful modification for homeowners. The lawsuit further claims that bankers intentionally mislead homeowners about potential eligibility and knowingly failed to credit payments to the loan during the HAMP trial period.

It is unclear whether the federal lawsuit is a part of the recent $25 billion settlement that state and federal officials reached with some of the nation's largest home mortgage lenders. The documents unsealed Wednesday are from the second federal whistleblower case related to home mortgage practices to be unsealed in recent months.

Source: Thomson Reuters News and Insight, "Whistleblower says BofA defrauded HAMP," March 7, 2012

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