“Releasing a debt that has already been discharged is not in the spirit of the settlement,” Mr. Parker said. “My concern is that the bank will use these cases to avoid having to give true principal reductions to people who need it.”
There was plenty of fanfare last August when Bank of America agreed to a record $16.7 billion settlement with the Justice Department over dubious mortgage practices. Prosecutors crowed about the deal, which required the bank to provide $7 billion of consumer relief — including such things as loan modifications — over the ensuing four years.
But now that the settlement has faded from the public eye, questions are arising about whether the promised assistance is actually getting to the right people and whether the bank will be allowed to claim credit for consumer relief that far exceeds its actual value.
The details are complex, but worth delving into, given the importance of the issue. As outlined in the settlement, Bank of America is required to make a wide array of loans more affordable for borrowers. The bank was expected to forgive or reduce the amounts owed on the first and second mortgages it held. In exchange, the bank would receive credit for these reductions in dollar amounts outlined in the settlement.
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