Bank of America Sued In Texas For Abusing Homeowners with Misinformation and Misdirection

For the most part BAC Home Loans Servicing, LP is the pits.   Faxing documents several times in a  row because BAC “lost them” or got a new fax number has been the norm for a long time.   Before Equator kicked in (which is a whole other story) Bank of America was consistently the slowest servicer in helping homeowners with short sales or loan modifications.

While the speed at which they have been approving short sales has improved, I believe in a large part this is due to their new standard policy of pumping out an approval that simply releases the lien on the home without forgiving the borrower the deficiency balance.   This can be deadly for the homeowner and the real estate agent who likely advised them to accept the short sale offer.

- The Bank Slayer

Thanks to Robert Doggett @ Texas RioGrande Legal Aid for the following post.

Bank of America N.A. and its wholly owned subsidiary, BAC Home Loans Servicing LP, have been sued by 15 homeowners and the Texas Housing Justice League for abusive servicing practices.  The Texas suit alleges:

This lawsuit complains … of a systematic home loan servicing scheme that includes hours of telephone runaround, misleading and inconsistent information, lost correspondence, verbal abuse, and extensive delay, all of which have documented costs not only in terms of money, but in health. The facts in this case reveal the harsh reality that underlies the loan servicer’s press statements about loan modifications and forbearance agreements following collapse of the U.S. housing market.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 1 here.

It would be hard to imagine that Bank of America and BAC will fight the facts of the case; the question will likely be whether they can get away with it.  The servicer will likely claim that poor “customer service” is something that must be accepted like a slow waiter or a bad movie.  The difference is of course that homeowners are not merely customers that should expect to be mistreated and lied to — homeowners have a contract with the holder of their home loan and these servicers are the agents for the holder — and moreover, servicing a home loan is not in the realm of someone forgetting your fries or being tricked into seeing Gigli.

Many of the Plaintiffs were told that they were eligible for loan modifications or other workout assistance, only to spend months being shuffled through Defendant BAC’s “Home Retention,” “HOPE”, “Foreclosure,” “Bankruptcy” and “Collections” departments with no resolution. Others simply wanted to know that they had been reviewed accurately for eligibility in any available programs, that a denial of assistance was final, and that their arrearage had been correctly calculated. Instead of providing Plaintiffs with basic information about the servicing of their loans and providing timely screenings for workout assistance, however, Defendant BAC misrepresented material information to the Plaintiffs about their loans, and forced them into a scheme of operation so dysfunctional that the constant barrage of misinformation, misdirection, and deliberate inactivity amounted to abuse and harassment.

Plaintiffs describe feeling “harassed,” “like a yo-yo,” and “blocked at every turn.”  When Plaintiffs called Defendant BAC the information they received over the telephone often conflicted with written statements or prior telephone conversations. In many of the telephone calls Defendant BAC spun Plaintiffs in a labyrinth of transfers from one department to another and back again. Plaintiffs spent hundreds of hours on the telephone, explaining their stories to a different person each time they called; often they were transferred between departments, knowing they would never speak to the same person again, and wondering if the information being provided would be contradicted by the next person they spoke with. Often, it was.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 5-6 here.

While servicers will likely complain about the heavy caseloads and large number of loans in default that require attention — one thing is certain, the foreclosure arm of these servicers and their contractors have managed to deal with the heavy caseloads quite well.  If servicers can foreclose on behalf of these lenders at a record pace, they can provide accurate, helpful, timely information to the other party to the contract — the homeowners.

The Texas suit does not merely seek monetary relief, it also seeks injunctive relief as well in an effort to actually encourage or force servicers to make real changes and eliminate these complaints:

Requests to speak with supervisors or managers were met with resistance. During the course of telephone calls to Defendant BAC, Plaintiffs often found themselves disconnected after waiting on hold to speak to a supervisor, or were told that no supervisors were available. Some Plaintiffs sought out face-to-face interviews by contacting Bank of America branch offices, but simply found themselves on speakerphones with the same unaccountable departments that had previously been providing them with misinformation by telephone. Written communications did not fare better. Plaintiffs’ written submissions were often lost or misplaced.  Plaintiffs were asked to sign the same documents three, four or even five times, and were asked to provide the same information repeatedly. Many of the Plaintiffs were assigned multiple “negotiators” who would not return telephone calls, or provide timely information to Plaintiffs.

Plaintiffs’ experiences are not isolated incidents, but instead reveal a pattern and practice by Defendant BAC of deliberately misinforming borrowers in default or at risk of default, and refusing to respond to Plaintiffs’ legitimate, written and oral requests for information.

Harryman, et al., v. Bank of America N.A., and BAC Home Loans Servicing LP, US District Court, Southern District of Texas, Victoria Division, 6:10-cv-51, Original Complaint at 5-6 here.

If servicers treated lenders the same way that they treat homeowners, their businesses would disappear.  Let’s hope this reform effort catches on, and servicers make changes without the necessity of litigation or a magician.