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Bank of America Mortgage Relief Falls Short

Mortgage Relief

In a settlement reached between Bank of America and the U.S. Department of Justice in August of 2014, Bank of America agreed to pay $16.7 billion, with some $7 billion of that amount earmarked for loan forgiveness, modification, and other forms of relief for its customers as a penalty for illegal and abusive conduct in managing mortgages. When originally reached, the settlement appeared to the general public to be a welcome—and overdue—measure that would grant relief to individuals still struggling to pay their mortgages. The settlement stipulated that Bank of America would need to prove that it had either forgiven or reduced $7 billion of the balance of its debtors’ loans within four years. The settlement also provided an additional incentive for the bank to move quickly, by counting more than $1 for each $1 in debt forgiveness that occurs before August 31, 2015.

Current and former Bank of America customers are now coming forward with stories of ways in which the bank appears to be attempting to avoid its obligations under the settlement. Bank of America has reportedly sent letters to customers whose loans were forgiven in the course of personal bankruptcy, stating that the full balance of those loans were forgiven. These letters baffle recipients, who know that Bank of America no longer had the right to seek payment from them. Bank of America explained that, in cases of a home equity loan extinguished in bankruptcy, the bank still has a second lien on the property on which it technically could have collected, and that the bank would only count 40% of such liens toward the $7 billion settlement. However, the National Consumer Law Center responded that banks rarely if ever recover under second liens, making the counting of 40% of a debt forgiven in bankruptcy very high. According to one consumer bankruptcy attorney, seven of his clients whose debt had been forgiven in bankruptcy have received such letters, which amounts to more than $700,000 in forgiveness that Bank of America may be counting in some part against the $7 billion they owe. These reports have left some consumer advocates dismal on the prospects that the Justice Department settlement will provide actual relief for current Bank of America debtors who need it.

If you have found yourself in need of help with an overwhelming mortgage or home equity loan, seek help soon, before these issues spiral out of control. Contact the knowledgeable Kentucky bankruptcy and consumer law attorneys at Lanna Kilgore PLLC, available to assist you on your bankruptcy and debt issues in Bowling Green, Warren, Simpson, Logan, Allen, and throughout South Central Kentucky.

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