lending laws

The lawsuit initiated in federal court blames Bank of America for certifying property modification loans as compliant with the law, trying to get $907 million in incentive payments from the government.

Courthouse News service informs that Michael J. Fisher of Southlake, Texas has filed a suit under the False Claims Act. From 2008 to 2012 he assisted attorneys to secure mortgages modifications for the homeowners. The complaint was filed in March in Manhattan Federal Court, but was just unsealed now.

J. Fisher claims that in hundreds of Bank of America and other lenders’ contracts he analyzed, he found a certain pattern of Truth in Lending Act violation.

As reported by Courthouse News Service, Bank of America regularly failed to let the borrowers know that they have the right to withdraw their request for modification of a loan, in accordance with Section 1635 of the TILA.

Concealed Violation of Federal Rules

The complaint also states that the written acknowledgement of TILA disclosures often just created a rebuttable presumption. And also “Refinancings with no new advances, but the same creditor and secured by the same property, and certain other transactions are exempted from the rescission provisions. The actionable conduct alleged as unlawful herein involves transactions which were not exempted from the rescission provisions.”

The main Fisher’s concern is about the “new-money-loans”, advanced to the borrowers. In such loans the means are rescindable and the lenders are obliged to notify the customers about it with the notice in 2 copies, which should be a separate document informing the consumer about his rights and the process of rescission.

No money should be given out to the client, but for in escrow, no services provided and no materials supplied, until the 3 day period passes while which the right of rescission can be used. The exclusions constitute only those limited cases, when the consumer is allowed to waive his right to rescind.

The federal government initiated the Home Affordable Modification Program (HAMP) after the Great Recession and the global financial crisis set in in 2007. The HAMP wants to inspire to use easy personal loans to modify loans that were secured by the property.

The government provided special payments for lenders, borrowers and loan-owners as a part of granting of each modification and keeping payments current after the changes implemented.

The foreclosures were widespread at that period and HAMP was considered a measure to help people keep their homes. Besides, the lenders could get up to $83.33 per month as a “Pay for Success» fee.

Bank of America to Get Billions

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Since October, 2011 the lenders should have been paid up to $4,600 for the loan modification compliant with HAMP, meaning they get about $1,600 for modification and around $3,000 for total good standing payments in course of thirty six consecutive months.

According to Fisher’s complaint bank of America deceitfully certified its full compliance with state regulations, federal and local as well and consequently with the rules of HAMP.

Bank of America has also decided to settle numerous lawsuits, apart from the above mentioned, which are connected with the other lending issues, costing investors billions in the times of the financial crisis and Great Recession

U.S. Attorney General Eric Holder mentioned that the bankers deceived investors even after facing the concerns as to their practices, they approved «loans with fundamental credit, compliance and legal defects.”