U.S. District Judge rejected the class action lawsuit against Bank of America Corporation (BAC - Free Report) – the second largest U.S. Bank. The class action lawsuit had alleged that BofA instead of assisting the troubled homeowners in modifying the loans to which they were entitled forced them toward a foreclosure.
This is a 3-year old case wherein a class action lawsuit against BofA was filed by 43 individuals and couples belonging to 26 U.S. states. However, the U.S. District Judge, Rya Zobel rejected the plea against BofA stating that the claims made by the plaintiff were too diverse to permit class action.
The verdict by the U.S. Judge is a setback for the homeowners who accused BofA of not complying with the Home Affordable Modification Program (HAMP). HAMP is a federal program, which was introduced in 2009 with the aim of providing incentives to mortgage servicers in an attempt to persuade them with loan modifications and thereby assisting them to keep their homes.
The plaintiffs accused BofA of failing to administer its HAMP modifications efficiently. They claimed that the bank in several cases stated that it had misplaced the documents. Further, the bank sometimes either claimed to have not received the required documents from the homeowners or randomly deprived its customers of permanent modifications.
Presently, several mortgage lawsuits faced by BofA are due to its acquisition of Countrywide Financial Corp. BofA acquired Countrywide Financial in 2008 for $2.5 billion, which turned out to be a sour investment for the company. The acquisition heightened BofA’s expenses due to litigations, loan repurchases and mortgage expenditure. In fact, a number of lawsuits are still pending in court, most of which are related to the sale of MBS by Countrywide Financial.
Apart from BofA, many other U.S. banks including Wells Fargo & Company (WFC - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and Citigroup, Inc. (C - Free Report) are encountering similar lawsuit charges.
BofA currently carries a Zacks Rank #3 (Hold).