Bank of America Corp. lost a bid this week to dismiss several legal challenges filed by financially troubled homeowners in 19 states.
U.S. District Court Judge Rya W. Zobel in Boston ruled that litigation involving 26 consolidated cases filed by homeowners seeking to stop their foreclosures should continue.
A group of homeowners who were negotiating with lenders to lower their monthly payments through the federal Home Affordable Loan Modification Program (HAMP) launched the case last year. HAMP was launched in 2009 to slow a wave of foreclosures.
Nationwide, about 1.9 million homeowners were granted trial loan modifications, but less than half had their payments permanently lowered, according to federal records.
The homeowners say that BofA broke a "binding contract" by not giving them permanent mortgage loan modifications after they had complied with the lender’s requirements during a trial period under HAMP.
Boston attorney Gary Klein, lead council for the homeowners involved in the consolidated cases, told the Boston Globe that Zobel's decision would help prevent thousands of properties from being seized. The court, he says, "upheld the theory that people have a right to permanent loan modifications under the HAMP program if they kept their end of the bargain."
Klein’s firm, Roddy Klein & Ryan, previously has sued other larger lenders over similar problems with loan modifications - including CitiMortgage, Wells Fargo Home Mortgage and JPMorgan Chase.
Bank of America officials declined to comment on the decision.
