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New Jersey Court Scolds Bank of America Over Loan Modification

Last week, a New Jersey Appeals court upheld a lower court's decision regarding Bank of America's handling of a particular loan modification and foreclosure - including behavior by the bank that "borders on unconscionability," as written by the court in their opinion.

The dispute arose following an October 2009 letter written by a division of Bank of America - BAC Home Loan Servicing L.P. - in which it offered a woman a three month "loan modification" after she defaulted on her home loan, according to court documents. Court filings further allege that the woman was told in the letter that she would be able to join this program permanently if she made her payments on time and met other program requirements.

In March of 2010, the woman was qualified for the program and began payments on her $591,913 mortgage, according to court documents. However, Bank of America later stated that the original offer had been sent to the woman by mistake and that she wasn't meant to be permanently in the loan modification program.

The New Jersey appeals court found Bank of America's actions unusual, noting that the bank had no problem accepting the woman's payments just "to eventually pull the rug out from under [her]." The court continued, "We confess some puzzlement at why a mortgage company would continue foreclosure proceedings against a debtor who, unlike many, is actually paying her mortgage."

Ultimately, the court affirmed the lower court's ruling and upheld the mortgage modification, which will presumably allow the woman to keep her home. Unfortunately, not everyone facing foreclosure in New Jersey will be as lucky.

Source: Canadian Business, "NJ court upholds mortgage modification," AP, June 22, 2012

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