The Bank of America’s demand for a couple to pay off their loan has resulted in a court order to pay $10,000 monthly for their demands in a ruling the Bankruptcy Court judge said was intended to “send a message” to lawyers acting on such matters.
Writing in the WSJ Law blog, Peg Brickley said:
“This is not just a stupid mistake. This is a policy.”
Judge Robert Drain’s decision, memorialized in a written ruling issued Tuesday, documents a barrage of letters and phone calls attempting to collect the debt from Edwin and Michelle Ramos. Chapter 7 bankruptcy relieved them of the obligation to pay off their home loan while preserving the bank’s right to foreclose on its collateral. The calls and letters kept coming to the Ramoses, even after their attorney pointed out that their personal liability had been discharged in bankruptcy. The bank ignored him, he said, and, according to court records, failed to respond to Judge Drain until 10 days after he signed an order imposing sanctions on the lender.
In a statement, Bank of America said it’s “resolving the issues with the court” and working with the homeowners “while we continue researching and investigating what transpired.”
Judge Drain is not alone in his criticism of Bank of America. In March, U.S. Bankruptcy Court Judge Karen Jennemann in Orlando, Fla., fined the bank $220,000 for repeated violations of court orders involving a loan-modification arrangement.
“The Debtors, even to this date, continue to receive statements from BOA claiming substantial additional payments due, erroneous payment amounts, inflated interest rates and incorrect loan type, and purporting to hold over $12,000 of the Debtors’ payments in ‘unapplied funds,’” Judge Jennemann wrote.
When it came to the $227,000 home loan of Warren and Mary Houghland, the judge said it should be considered paid. The bank disputed the order, saying it was unfair, and earlier this year settled with the homeowners.
Bankruptcy lawyers claim there has been little changed in the behaviour of lenders, even after the Bank of America signed on to a widely trumpeted $25 billion home lending industry consent decree requiring it to improve its treatment of borrowers in the marketplace.
It appears that banks remain very much in the driver’s seat when it comes to distressed borrowers.
In the case of the discharged debt collection, the Ramoses had to not only hire a lawyer but also had to reopen their bankruptcy case.
Last week, Bank of America agreed to stop the calls and letters except for informational notices that inform the Ramoses of what they have to do to hold onto their home. Chapter 7 bankruptcy absolved them of the obligation to pay the debt but preserved the bank’s lien on their property.
“This is a national problem. It’s happening all over the place,” said New York attorney Michael Schwartz, who represented the Ramoses. “Why is BofA doing it? Because they can.”
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