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LOS ANGELES — California homeowners sued Bank of America on April 6, claiming the lending giant is intentionally withholding government funds intended to save homeowners from foreclosure, Hagens Berman Sobol Shapiro announced.
The case, filed in the U.S. District Court for the Northern District of California, claims that Bank of America systematically slows or thwarts California homeowners’ access to Troubled Asset Relief Program (TARP) funds by ignoring homeowners’ requests to make reasonable mortgage adjustments or other alternative solutions that would prevent homes from being foreclosed. Hagens Berman filed a similar complaint in Washington state last month.
Bank of America accepted $25 billion in government bailout money financed by taxpayer dollars earmarked to help struggling homeowners avoid foreclosure. One in eight mortgages in the United State is currently in foreclosure or default.
Bank of America, like other TARP-funded financial institutions, is obligated to offer alternatives to foreclosure and permanently reduce mortgage payments for eligible borrowers struck by financial hardship but, according to the lawsuits, hasn’t lived up to its obligation.
According to the U.S. Treasury Department, Bank of America services more than 1 million mortgages that qualify for financial relief, but have granted only 12,761 of them permanent modification. Furthermore, California has one of the highest foreclosure rates in the nation for 2009 with 632,573 properties currently pending foreclosure, according to the lawsuit.
The complaint says that part of Bank of America’s income is based on loans it services for other investors, fees that will drop as loan modifications are approved. The complaint also notes that Bank of America would need to repurchase loans it services but has sold to other investors before it could make modifications, a cumbersome process.
According to the TARP regulations, banks must gather information from the homeowner, and offer a revised three-month payment plan for the borrower. If the homeowner makes all three payments under the trial plan, and provides the necessary documentation, the lender must offer a permanent modification.
Named plaintiffs and California residents Suzanne and Greg Bayramian were forced to foreclose their home after several failed attempts to make new arrangements with Bank of America that would reduce their monthly loan payments, according to the complaint.
According to the complaint, Bank of America deferred Bayramian’s mortgage payments for three months but failed to tell them that they would not qualify for a home-loan modification until 12 consecutive payments. Months later, Bank of America came back to the Bayramian family and said would arrange for a loan modification under the TARP home loan program but never followed through. The bank also refused to cooperate to a short-sale agreement saying they would go after Bayramian for the outstanding amount, according to the lawsuit.
Bank of America continues to ignore TARP regulations and instead creates more financial pressure on homeowners, the court filing states.
The lawsuits charge that Bank of America intentionally postpones homeowners’ requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by taxpayer dollars financing TARP-funds and also collects higher fees and interest rates associated with stressed home loans.
Homeowners in Washington and California with mortgages through Bank of America are encouraged to contact Hagens Berman if they received an inadequate response from the bank for a home loan modification request after April 13, 2009. For more information or to join the lawsuit, visit: www.hbsslaw.com.
Hagens Berman Sobol Shapiro LLP is a consumer rights class action law firm with offices in San Francisco, Seattle, Chicago, Boston, Los Angeles and Phoenix. More about the law firm can be found at www.hbsslaw.com.