Six former employees and one contractor say Bank of America's mortgage servicing unit consistently lied to homeowners, fraudulently denied loan modifications and offered bonuses to staff for intentionally pushing people into foreclosure, according to a Salon.com report.
The allegations were made in sworn statements added to a civil lawsuit filed in federal court in Massachusetts.
One of the former employees, Erika Brown, said in her statement that the bank's practice was to "string homeowners along with no apparent intention of providing the permanent loan modifications it promises."
Salon explained the process in more detail:
"The government's Home Affordable Modification Program (HAMP), which gave banks cash incentives to modify loans under certain standards, was supposed to streamline the process and help up to 4 million struggling homeowners (to date, active permanent modifications number about 870,000). In reality, Bank of America used it as a tool, say these former employees, to squeeze as much money as possible out of struggling borrowers before eventually foreclosing on them. Borrowers were supposed to make three trial payments before the loan modification became permanent; in actuality, many borrowers would make payments for a year or more, only to find themselves rejected for a permanent modification, and then owing the difference between the trial modification and their original payment."
The employees' statements went on to describe a system of negligence, falsifying records and mass, systematic rejections of loan modification applications called a "blitz" all intended to force borrowers into foreclosure and allow Bank of America to collect additional fees from them.
The statements also described a system of cash bonuses, as well as gift cards for local retailers, offered by senior managers to employees who met quotas for pushing accounts into foreclosure.
Bank of America has said the statements paint a "false picture" of the bank's activities and that they are "rife with inaccuracies."