MORTGAGE LOAN COMPLIANCE®

Bank of America is among a growing number of banks with legal complaints accusing them of disregarding what should be binding agreements to reduce the monthly mortgage payments of troubled borrowers.

Many of these suits involve permanent modifications through the U.S. Treasury-administered Home Affordable Modification Program, which offers incentives to loan servicers who extend modifications, as well as so-called proprietary modifications, which banks offer independently of the government guidelines.

In the most recent HAMP report The U.S. Treasury said that 70 percent of the trial modifications initiated since June 1, 2010 under the program's guidelines have been made permanent, up from 42 percent for trials started before that date.

Both government officials and mortgage lenders have been touting statistics showing an increase in the number of modifications being extended. The Big Four, as well as Hope Now, mortgage servicers and others have reported that up to 1.8 million loans were modified in 2010, up from 1.2 million modifications in 2009.

However earlier this month, U.S. Treasury officials announced it was withholding incentives from Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. for incorrectly determining that borrowers were ineligible for HAMP modifications, a claim that the banks denied.

But even as troubled borrowers increasingly manage to wrangle modification deals from reluctant banks, they're finding that problems persist long after the ink dries on their new loan contracts.

The Connecticut Fair Housing Center looked at hundreds of mortgage modifications granted in recent years to clients of partner organizations in several different states and found that nearly a 25 percent were having problems with inaccurate balance statements, erroneous default notices and other issues.

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