BofA Should Face Foreclose Probe by TARP, Waters Says

Bank of America Corp., the second-biggest U.S. lender, should be investigated for its treatment of distressed homeowners, said Representative Maxine Waters, the top Democrat on the House Financial Services Committee.

Employees say the lender told them to delay applications to the Home Affordable Modification Program, or HAMP, to increase fees and send customers into foreclosure, Waters wrote today in a letter to the watchdog for the U.S. government’s bailout program. She cited a June 14 Bloomberg article based on court documents in making the request.

“Foreclosure is often the most profitable end result for a servicer that does not own the loan they are servicing,” the California Democrat wrote to Christy Romero, the special inspector general of the Troubled Asset Relief Program. “It goes without saying that this is an outright abuse of consumers and government mortgage-assistance programs.”

Bank of America is being sued by homeowners who didn’t receive permanent HAMP loan modifications after making payments under trial programs, according to court papers. Statements from former employees of the Charlotte, North Carolina-based firm were included in a June 7 filing as part of the plaintiffs’ attempt to gain class-action status.

The bank has denied the allegations, saying that it has completed more HAMP modifications than any other loan servicer, and that it will address the suit in future court filings.

“These allegations are absurd, patently false and contrary to Bank of America’s long-standing policy only to foreclose as a last resort when other available options to help keep people in their home have been exhausted,” Jumana Bauwens, a Bank of America spokeswoman, said today in an e-mail. “Foreclosure is the worst outcome for the borrower, the servicer and the investor who owns the loan.”

Waters also sent letters to the Federal Reserve’s board of governors and the Office of the Comptroller of the Currency. The lender has received $992 million in incentive payments tied to the HAMP program, she wrote.

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