Bank Of America's Mortgage-Modification Practices Border On 'Unconscionability,' Judges Say

In 2009, Bank of America threw a lifeline to Sylvia Ficco, a struggling New Jersey homeowner who'd recently defaulted on a $591,000 home loan. Come join our mortgage modification program, the bank told Ficco. We'll help you get everything sorted out.

A few months later, the bank changed its tune.

According to the Associated Press, BofA accepted Ficco into its mortgage-mod program and cashed the checks she sent -- until the day it informed her that she wasn't actually eligible for the program, that she'd been invited and accepted in error and that the bank now wanted to foreclose on her house.

BofA's conduct earned it a rebuke from a New Jersey appeals court last week, when judges wrote that for the bank to offer Ficco help, then "pull the rug out from under" her after she'd been making payments for months, "borders on unconscionability."

The court decision upheld an earlier ruling that will allow Ficco to keep the loan modification, and thus her home, according to the Morris County Daily Record.

While many cash-strapped homeowners have sought loan modifications amid the foreclosure crisis, BofA's mortgage-mod efforts have been marked by inefficiency and questionable practices.

In June 2010, a Bank of America representative admitted the company had lagged in processing paperwork for people seeking loan adjustments, and that they were taking steps to "try to make sure we don't lose documents anymore."

Later that year, the attorneys general of Arizona and Nevada filed suit against BofA, claiming that the bank had committed all manner of misconduct in its dealings with borrowers in those states. Among other things, the AGs accused Bank of America of promising permanent loan modifications to homeowners, then withdrawing that offer, in much the same way the bank did to Ficco in New Jersey.

Since then, the bank has also been accused of refinancing a borrower's loan in such a way that he ended up with higher monthly payments than he had before; and of responding to another borrower's request for a loan modification by sending the borrower a letter asking him to prove he was actually dead.