Some Big Mortgage Lenders Never Learn

by 07 May 2013

Bank of America and Wells Fargo may be headed back to court in New York. According to a news item on CNBC, the New York Attorney General is preparing a lawsuit against these two heavyweight mortgage lenders for multiple violations of the historical National Mortgage Foreclosure Settlement Agreement of 2012. 

The complaint filed by Attorney General Eric Schneiderman states that Bank of America and Wells Fargo have engaged in conduct that resulted in 339 violations of the settlement agreement. Under the terms of the settlement, the five major mortgage lenders and servicers in the U.S., which also include Ally Financial, Citi and JP Morgan Chase, promised to never again engage in dubious and fraudulent practices such as robo-signing and dual-tracking. 

Schneiderman held a press conference to explain that the violations he intends to prosecute are flagrant. Compliance with the settlement agreement is being monitored by a team led by Joseph A. Smith, the former Banking Commissioner of North Carolina. The monitoring team receives thousands of complaints against the banks by clients who bemoan their banks' lack of compliance with the settlement agreement. 

Even though the complaints and alleged violations give consumers many reasons to be concerned, the settlement agreement has benefited hundreds of thousands of borrowers by saving them from foreclosure with mortgage loan modifications. 

Losing Patience

The NY Attorney General later appeared on MSNBC and told viewers that the U.S. Department of Justice will also review the banks' less-than-stellar compliance with the settlement agreement. Schneiderman had very strong words for the banks, chastising them for their confidence that in believing that the rules do not apply to them. 

Schneiderman is just one public official interested in holding big banks accountable for their transgressions. In recent weeks, Senators Carl Levin (D-Mich.) and Sherrod Brown (D-Ohio) have voiced their exasperation at the too-big-to-fail doctrine that has prevailed in the American economy since 2008. The NY Attorney General and the Senators believe that the time has come to hold top executives responsible for their actions. 

Although Bank of America seems to forever be under the negative spotlight, its number of alleged violations this time is actually less than Wells Fargo's. Bank of America will have to answer to 129 violations while Wells Fargo will face 210 complaints.


  • by William Matz | 5/8/2013 8:45:38 PM

    Why should any of this come as a surprise? The bankswere required to follow the standards by MHA/HAMP in 2009. Later, many entered into consent decrees with the Federal Reserve again promising to follow the same standards. Some states enacted parallel requirements. Then the robo-signing scandal led to the AG investigation and settlement in which the five big banks promised to "really, really behave" this time. Now we see the same sorts of violations, At least the NY AG is pursuing this. And in California the new Homeowners Bill of Rights, effective in 2013 wrote much of the settlement into law, with the banks being required to pay borrower attorney fees for proven violations.

    How pathetic and unbelievable are bank protests that the errors are just the result of being overwhelmed. I remember the B of A CEOs announcing proudly in 2009 and 2010 that they were adding 10,000 and then 7,000 employees to deal with all the distressed mortgages. 2 bad they went and hired fast food workers and others with no experience, when there were tens of thousands of unemployed mortgage industry veterans who would have actually known how to handle the files. Do you think maybe hiring the incompetent was part of the plan? Numerous whistleblowers from big banks and servicers have come forward to explain how impeding resolution and forcing foreclosure was company policy.

    It seems likely that the true motivation for the rush to foreclosure has been lenders' and servicers' desire to "sweep the dirty laundry under the rug".They knew if challenged, they could not prove ownership and the right to foreclose. So they gambled [correctly] that most borrowers would not challenge them and they could rush through 90+% of the foreclosures unquestioned. In some of the judicial foreclosure states, such as NY, FL, and MA, attorneys began to challenge -successfully- banks claims of ownership and right to foreclose. But the vast majority of defaulting borrowers had neither the resources nor the inclination to challenge Wall Street, with its billions of dollars in taxpayer bailout funds. Not surprising then that less than 20% of borrowers predicted to be helped actually were.

    2 many war stories to tell here; one will typify. My client received her mortgage mod agreement from B of A in the mail and later the SAME DAY (!) got a call that the house had been sold at auction. However, she had the last laugh; after another year in her condo with no payments after foreclosure she learned that B of A got stuck with a $20,000 special assessment levied because of all the lost fees from defaulted units.

    What is especially sad is the shameful failure of America's financial institutions to accept responsibility for the debacle of securitization run amok. But when Wall Street idolizes the Gordon Gekko "greed is good" philosophy of business, can we really expect anything different?


Should CFPB have more supervision over credit agencies?