When will these stories end? Lily Washington started a loan modification process with Bank of America (BoA). However, shortly thereafter her son was injured in Iraq and she had to travel to a military hospital in Germany to be with him. Although she had notified the bank and received a written response that they would wait for her return, Fannie Mae foreclosed on her home. When she returned, her home had been emptied and a “for sale” sign had been planted in the front yard. It is not clear whether BoA or Fannie disposed of all of her belongings, including Lily’s son’s “purple heart!”
1. What is a loan modification? Explain various scenarios.
2. Develop a loan modification example and explain the journal entries that the bank would make for your case.
3. What is Mrs. Washington doing about the situation? How will this remedy replace the purple heart and other keepsakes?
4. What is BoA’s position? What are the issues from an accounting viewpoint for BoA? Explain what you think the outcome might be. Based on your outcome, explain how it would be accounted for on BoA’s books.
5. Is this the first time that BoA has been in the news regarding foreclosures? Explain.
Huffington Post Staff. (2012).Lilly Washington Says BofA Foreclosed On Her Home, Took Her Son’s Purple Heart, While She Was Visting Him In A Military Hospital, June 5 (Retrievable at http://www.huffingtonpost.com/2012/06/05/lilly-washington-bofa-foreclosure_n_1570860.html)
HP Video. (2012). Woman Claims Bank Foreclosed on Home without Notice. Huffington Post, June 5.