Bank misled borrowers, lawsuit says

A new lawsuit says Bank of America misled borrowers trying to hang onto their homes, pushing them into foreclosure while it enriched itself off a federal mortgage-modification program.

The suit, filed this month in federal court in Charlotte, N.C., is the latest to allege the Charlotte-based company abused homeowners seeking to reduce their mortgage payments through the Home Affordable Modification Program, or HAMP. The U.S. Treasury Department started the program in 2009 after the financial crisis to help struggling homeowners avoid foreclosure.

Brought by 11 borrowers across the U.S., the suit was initially filed last month in Mecklenburg County Superior Court before being moved to federal court. The suit says it involves individual borrowers after a federal judge in Massachusetts in 2013 denied a request to grant class-action certification for a case against Bank of America involving modification program applicants from across the U.S.

In issuing that rejection, the judge determined that borrowers had been subjected to a “Kafkaesque bureaucracy” and that they had plausibly alleged Bank of America “utterly failed” to administer modifications in a timely and efficient way. But the judge also said the various claims were too different to justify folding them into a single class-action case.

The latest suit claims that Bank of America falsely told applicants they had to stop making regular monthly mortgage payments to be eligible for a program modification.

It was part of the bank’s scheme to prevent borrowers from receiving a modification so that it could acquire their homes through foreclosure.