Here Lies Bank of America, Ex-Employees Allege

Several former Bank of America (NYSE:BAC) employees filed declarations in a federal court last week claiming the mortgage lender told them to lie to customers seeking loan modifications.

Bank of America fired back, essentially calling them the liars. "Each of the declarations is rife with factual inaccuracies," the bank responded in a statement emailed to media.

Bank of America also attacked the credibility of the lawyers who gathered these declarations as part of a class-action lawsuit filed in 2011 in Boston's federal district court. "These attorneys are painting a false picture of the bank's practices," the bank said in the statement, adding it would respond more thoroughly in court next month.

It always makes for engaging courtroom drama when witnesses call the defendant a liar, and then the defendant says the witnesses are liars. But if these witnesses are liars, they're liars who worked at Bank of America.

It's also worth noting that Bank of America was among five mortgage servicers that reached a $25 billion settlement with state and federal regulators last year to resolve similar allegations of abusive foreclosure practices.

And here's the other thing: Ever since the Obama administration started the Home Affordable Modification Program, or HAMP, in 2009, we've been hearing about people who say they applied for a loan modification only to hear that the bank inexplicably lost their paperwork--and then their homes were foreclosed.

Former Bank of America employees allege the bank had this paperwork all along. Saying it didn't was part of a scheme to deny loan modifications and steer financially troubled customers into more expensive re-financings.

Oh, if only Snidely Whiplash, and all the other mustachioed villains from yesteryear's melodramas, could see the way banks can foreclose on granny's homestead today.

The employees say they got bonuses for denying as many loan modifications as possible. And for putting homes into foreclosure, they say Bank of America rewarded them with gift cards to Target and Bed Bath and Beyond -- where housewares are sold, if you can fathom that irony.

The accusations are so outrageous, it's best to read them in the former employee's own words -- which they have submitted under penalty of perjury.

* "Although I was called a "Home Retention Specialist," my job was to collect as much money as possible from homeowners," said Recorda Simon, who worked at Bank of America's call center in Fort Worth, Texas, from August 2010 to January 2011.

* "We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had)," said Simone Gordon who worked at Bank of America from July 2007 to February 2012. "A collector who placed ten or more accounts into foreclosure in a given month received a $500 bonus. Bank of America also gave employees gift cards to retail stores as rewards for placing accounts into foreclosure."

* "I saw records regarding hundreds of homeowners that Bank of America treated dishonestly," said Erika Brown, who worked at Bank of America from June 2009 through June 2010. "The homeowners were eligible for loan modifications under HAMP, sent back all the required documents, and made all their required payments. Bank of America nevertheless damaged their credit ratings by reporting them delinquent, tacked on additional charges to their loans, increased the amounts it considered as being owed and often referred these homeowners to foreclosure."

* "I told my supervisors these practices were ridiculous and immoral," said William E. Wilson Jr., a team manager for Bank of America from June 2010 through august 2012, in Charlotte, N.C. "We were instructed to delay and then push homeowners to accept an internal refinance so that Bank of America would profit. Once an applicant was finally rejected after a long delay, the bank would offer them an in-house alternative. Bank of America would charge a higher interest rate, ranging up to 5%, as compared to 2% if the loan had been modified under HAMP."

* "The numbers Bank of America were reporting to the government and to the public were simply not true," said Steven Cupples, an underwriter who worked at Bank of America until 2012. "Employees who challenged … the ethics of Bank of America's practice for any reason were fired."

* "Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications, while leading the public and the government to believe that it was making efforts to comply with HAMP," said Theresa Terralonge, who worked for Bank of America from June 2009 to June 2010.

If this is indeed the way one of America's largest mortgage servicers did business, no wonder HAMP has been widely panned as a failure. The program was supposed to help as many as four million homeowners when it was unveiled in 2009, but it has only resulted in about 1.1 million permanent loan modifications.

Of nearly $30 billion in bailout funds allocated to housing programs, including HAMP, the Treasury has only spent about $5.2 billion. By contrast, Bank of America, alone, has received tens and tens of billions in bailout funds and loan guarantees since the financial crisis began.

HAMP was set to expire at the end of the year. President Obama recently announced plans to extend it for another two years because too many homeowners are still in trouble. If former Bank of America employees are to be believed, there isn't much point..

(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. The column is published each Tuesday and Thursday at 9 a.m. ET. Contact Al at or