Former Bank of America Corp (NYSE:BAC) employees charge that they were forced to use the Federal government’s HAMP program to push mortgage holders into foreclosure. As these allegations come to light, Wall Street may once again find itself the target of Main Street ire.
In October of 2012 the United States government decided to pursue a civil suit against Bank of America, among other Wall Street firms. According to the suit, the government charged that Bank of America Corp (NYSE:BAC) had illegally sold thousands of “toxic” home loans and then when they defaulted, and left Federal National Mortgage Association (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) footing the bill. Now, as the case is moving forward, some interesting allegations are coming to light. Former workers from Bank of America claim that their managers and supervisors instructed them to deny loan adjustments to people and pushed them into foreclosure, even though they qualified for government assistance programs.
In a Federal court in Massachusetts, so far six employees and one contractor have stood forward to offer sworn statements that they were instructed to deliberately “defraud” mortgage holders. The allegations come under the Home Affordable Modification Program (HAMP). HAMP was a key component of Barack Obama’s American Recovery and Reinvestment Act of 2009. Basically, the program aimed to help lower interest rates and repayment burdens for between 8 to 9 million homeowners.
HAMP came at a time when Wall Street banks were being handed billions of dollars in assistance. These bail outs were needed in order to avoid a worsening financial crisis and to prevent a complete collapse. Still, many members of “Main Street” were upset that major firms were getting bail outs and charged that far fewer efforts were being made to directly help middle class Americans. HAMP was meant to throw a life line to struggling working and middle class Americans, and also to stabilize the housing market that was then being flooded with foreclosed homes, thus suppressing prices.
Employees Charge Bank of America With Nefarious Practices
Now, former Bank of America Corp (NYSE:BAC) employees charge that the bank used the loan program to squeeze money from mortgage holders. Ultimately Bank of America denied many mortgage holders from accessing the loan modification program and instead offered their own higher interest modifications. According to the sworn statements, BoA would first offer the program to mortgage holders, who would then make a required three trial payments under the program. Then, using a variety of mechanisms, such as losing paperwork and letting it expire, BoA would systematically find ways to deny people access to the HAMP program. The former employees also state that mortgage holders were literally pushed into foreclosure so that BoA could collect additional fees.
Bank of America Employees Were Intimidated and Pressured
The BoA employees who testified also stated that they felt intimidated and pressured to follow these policies. Among other accusations, the former employees claimed that BoA would fire employees who spoke up or who tried to challenge the company’s policies. They also claimed that the company offered cash bonuses to employees who meet certain mortgage foreclosure requirements.
While the jury is still out on the case, these are disturbing accusations that could rile the American public once again. Since the fall out of the 2009 financial crisis, many middle class Americans have grown suspicious of America’s once highly respected financial institutions. It would be rash to jump to conclusions just yet, however the accusations against various Wall Street banks and their behavior during the crisis continue to grow.