BoA Foreclosure Reviews: Whistleblowers Reveal Extensive Borrower Harm and Orchestrated Coverup
On January 7, ten servicers entered into an $8.5 billion settlement with the Office of the Comptroller of the Currency and the Federal Reserve, terminating a foreclosure review process which was set forth in consent orders issued in April 2010...the foreclosure investigation was halted abruptly, with the OCC and the Fed failing to identify any methodology for how the portion of the settlement allotted to cash awards, $3.3 billion, would be distributed to homeowners who might have been harmed in 2009 to 2010, an astonishing lapse that will almost certainly result in small payments being made to large numbers of borrowers, irrespective of whether they deserved vasty more or nothing at all...
But...this outcome was no surprise to astute observers. The OCC consent orders had been launched in an unsuccessful effort to render the ongoing 50 state attorney general/Federal negotiations moot. Critics described how these orders were regulatory theater, with Georgetown law professor Adam Levitin comparing them to promising in public to spank a child, then taking him indoors and giving him a snuggle. Leaks during the course of the reviews confirmed these concerns, revealing deep-seated conflicts, limited competence among the review firms, half-hearted efforts to reach eligible homeowners, and aggressive efforts by the banks to suppress any findings of harm.
As grim as this sounds, the conduct was worse than the leaks suggested. After extensive debriefing of Bank of America whistleblowers,
we found overwhelming evidence that the bank engaged in certain abuses frequently, in some cases pervasively, in its servicing of delinquent mortgages. This is particularly important because Bank of America has been identified in previous settlements as far and away the biggest mortgage miscreant, paying over 40% of last year’s state/federal mortgage settlement among the five biggest servicers.
The OCC gave two rationales for shutting down the reviews. The first was that they were costly to Bank of America and other serivcers, potentially diverting funds from borrowers. This argument is spurious...The second reason given for shutting down the reviews is that the regulators claim few borrowers were harmed...This is both disingenuous and as we will demonstrate over our series,
patently false.
http://www.nakedcapitalism.com/2013/01/bank-of-america-foreclosure-reviews-whistleblowers-provide-extensive-evidence-of-borrower-harm-and-orchestrated-coverup.html
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