Banking giant faces revived claims it violated racketeering laws

by Michael Mata17 Aug 2016
Bank of America must face claims that it and another company - Urban Settlement Services, LLC (d/b/a Urban Lending Solutions) (“ULS”) - violated federal anti-racketeering laws by denying loan modifications to eligible borrowers.

The ruling was issued on August 15, 2016, by the US Court of Appeals for the Tenth Circuit, and reinstates purported claims by Richard George and other borrowers that BofA and Urban Settlement Services pretended to comply with guidelines under the Home Affordable Modification Program (HAMP) while modifying as few loans as possible.

Bank of America was required to participate in HAMP in order to receive a $45 billion bailout from the federal government. The bailout was needed to shore up BofA’s bad loans during the 2008 financial crisis. The federal government also guaranteed $118 billion in potential losses at the bank.  

Bank of America had to collect financial information from at-risk borrowers and evaluate their eligibility for loan modifications. The loan modifications would allow borrowers to pay lower interests on their mortgages. Eligible borrowers could enter a trial period to gauge their ability to make lower monthly payments. If borrowers made regular payments, the loans were permanently modified.

However, George and the other plaintiffs claim that BofA and Urban Settlement Services conspired to obstruct and delay their HAMP loan modification applications. According to a 2013 lawsuit filed in Colorado, the defendants lied to the borrowers and denied that they’d received the HAMP application documents (which had been, in fact, received). The deception was proven by FedEx tracking numbers.

BofA was allegedly motivated to feign compliance with HAMP in order to keep interest rates high on homeowners struggling to pay their mortgages. A US district court in Colorado dismissed the original 2013 lawsuit, stating that the plaintiffs had failed to sufficiently allege the existence of an association-in-fact enterprise under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Following the Tenth Circuit’s reversal of the dismissal, the case has gone back to the district court, which has to consider this and other racketeering allegations brought against BofA.   


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