BofA loses bid to end nationwide mortgage lawsuit

Reuters

By Jonathan Stempel

NEW YORK (Reuters) - Bank of America Corp lost its bid to dismiss a nationwide lawsuit accusing it of reneging on promises to help borrowers modify their mortgage loans under a much-criticized federal program.

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District Judge Rya Zobel in Boston said homeowners who contend they did not get modifications for which they qualified under the two-year-old Home Affordable Modification Program, or HAMP, could pursue claims against Bank of America.

The complaint "meticulously" detailed each plaintiff's compliance with loan modification conditions, but said the bank "willfully failed" to modify the loans, either in bad faith or for its own economic benefit, Zobel wrote. Such allegations are "sufficient" to let the lawsuit go forward, she added.

Zobel dismissed some other claims and rejected a request to block Bank of America while the lawsuit is pending from foreclosing on 37 borrowers said to be in "imminent danger" of losing their homes.

A Bank of America spokeswoman had no immediate comment.

The lawsuit was brought on behalf of 46 homeowners who tried to participate in HAMP to avoid foreclosures,

It combines 26 cases that had been brought in 19 states, and seeks class-action status for various plaintiffs.

Last week, Bank of America said it would take $20 billion of charges for various mortgage matters, including over its 2008 purchase of Countrywide Financial Corp.

Like several rivals, the Charlotte, North Carolina-based bank has also been in talks with state and federal regulators to resolve claims over alleged foreclosure abuses.

HAMP was created in 2009 as a centerpiece of efforts by the Obama administration to boost the nation's housing sector.

While it provides incentives to loan servicers to encourage modifications, HAMP has been widely derided as ineffective.

Through May, 731,451 borrowers had received permanent loan modifications, far below the original goal of 3 million to 4 million.

The Republican-controlled House of Representatives voted in March to wind down the program, though the Democrat-controlled Senate is not expected to follow.

Bank of America, JPMorgan Chase and Wells Fargo & Co are the largest servicers participating in HAMP.

The case is In re: Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, U.S. District Court, District of Massachusetts, No. 10-md-02193.

(Reporting by Jonathan Stempel)