Lawsuits Alleging "HAMP" Violations By Lenders Not Following Through On Loan Modification Promises Begin To Gain Traction

In Cincinnati, Ohio, Fox News reports:

• You qualify. Those two words, from the mouth of a bank representative last October, triggered a wave of relief for Tracy Davis and her husband James. The couple had been in and out of work for three years and were struggling to pay their mortgage -- so when the Bank of America worker told them they qualified under a federal program to have their loan modified [ie. the Home Affordable Modification Program -"HAMP"], they finally saw a path to keeping their house. "We walked out thinking, great," Tracy Davis said. But weeks went by, and nobody contacted them, and they weren't able to reach anyone -- other than representatives at a call center in India. "To this day, we've not heard from someone," she said. "It's February. This goes back to October 30."

• The Davises, who live in Cincinnati, are among a slew of struggling homeowners coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration.

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• The complaints have a common tune. Homeowners say the banks are giving them the runaround -- either by pledging to modify loans and then not following through, as with the Davis family, or by signing them up for the trial period and then leaving them in limbo. "This is an epidemic problem," said Stuart Rossman, director of litigation with the National Consumer Law Center.

• Under the terms of the Treasury Department program, participating banks that offer new loan terms are supposed to put homeowners through a three-month trial period. If the homeowners make timely payments and meet other conditions, the terms are supposed to become permanent. But a pair of lawsuits filed in U.S. District Court in Boston [...] claimed Bank of America and Wells Fargo were violating those rules. Rossman, who is helping to represent the plaintiffs, said banks -- in Massachusetts and across the country -- are stringing homeowners along for months without sealing the deal. "That, to us, is inexcusable and a breach of contract," he said. "They are living in limbo while they are at risk of losing their home."

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• In Ohio, the Davises were among 10 plaintiffs in a suit filed against Bank of America in early February in U.S. District Court.(1) The homeowners all say they experienced the same problem. According to the suit, they went to a Treasury-sponsored "borrower outreach" event in Cincinnati at the end of October at which bank representatives offered them modified home loans and pledged to send them the paperwork "within weeks." The documents never came, they say. [...] Mark Lawson, an attorney with the Legal Aid Society of Southwest Ohio representing the plaintiffs in the Ohio federal case, said loan modification problems are widespread. "It's pretty much everywhere," he said.

For the story, see Homeowners Say Banks Keep Them Underwater by Spurning Loan Program Rules (A slew of struggling homeowners are coming forward with complaints about the way banks are operating under a federal loan modification program announced last year by the Obama administration).

(1) For the Ohio Federal lawsuit, see Ponder et al. v. Bank of America, BAC Home Loans Servicing.