Loan Modification Lawsuits Filed Against CitiMortgage, JPMorgan Chase, Bank of America, Wells Fargo

By on September 17, 2010

Loan Modification LawsuitsIn reaction to the rising tide of foreclosures amid the ongoing subprime crisis, the U.S. Treasury introduced the Home Affordable Modification Program (HAMP) as part of the Financial Stability Act of 2009.  This program is expected to help an estimated 7 to 8 million eligible homeowners with loan modifications on their home mortgage debt.  However, several lawsuits and media reports have documented the adverse effect for some people who have entered into a loan modification program.  In addition to HAMP,  banks have other loan modification programs.

In a loan modification, the terms of an existing mortgage are modified from the original terms agreed to by the lender, usually to lower the amount of the mortgage payments.  Customers who are eligible for the program are provided with lower mortgage payments for a trial period, generally 60 to 90 days, to test whether they could fulfill the modified payments and to allow for the submission of requested documents.  When a homeowner successfully adheres to the trial period guidelines and submits all the necessary paperwork, the new modified terms should kick in.

USA Today published the story of a Lake Stevens, Washington, couple who applied for a loan modification with Bank of America and saw their mortgage payments temporarily lowered from $4,000 per month to $3,130 per month, yet were eventually denied from the permanent terms.  The Sopers reportedly said they made their reduced monthly payments early and did everything else that was asked of them. But they didn’t get a permanent modification, and don’t know why.

The couple filed a lawsuit against Bank of America claiming they are more than $8,000 behind on a mortgage that had been current a year ago, their credit scores have dropped by nearly 100 points, and Bank of America has threatened them with foreclosure.

A similar lawsuit was filed against JPMorgan Chase (doing business as Chase Home Finance LLC), in which homeowners had entered into agreements temporarily modifying loans, but weren’t extended formal offers for a permanent loan modification, as required, once they had successfully completed the trial period. 

“Chase has knowingly established a system designed to wrongfully deprive its eligible HAMP borrowers of an opportunity to modify their mortgages, pay their loans and save their houses from foreclosure,” the complaint said.

“Chase’s actions, which serve only its interest in extracting as much money as possible from borrowers it deems are at risk of default, thwart the very purpose of HAMP, constitute breaches of its various contracts and amount to immoral and unfair business practices,” the complaint added.

Additionally, Milberg has filed a class action against CitiMortgage, on behalf of borrowers who claim that they did what CitiMortgage asked them to but were not only denied the modification but were left in a much worse financial position before they accepted CitiMortgage’s invitation to try to modify their loans.

Also see: Milberg Attorney Jessica Sleater Discusses Loan Modification Lawsuits (video)

For more information regarding the lawsuits against CitiMortgage, JPMorgan Chase, Bank of America, Wells Fargo and other banks involved in loan modifications, please fill out the confidential form below.