Monday, June 17, 2013

Bank Of America Paid Foreclosure Bonuses While Lying To Homeowners

One of the nation’s largest mortgage servicers intentionally, knowingly, and routinely falsifies paperwork and lies to homeowners in order to boot them from their homes, according to bank insiders.

The latest of many civil suits over Bank of America’s handling of foreclosures and mortgage modifications has produced affidavits from six former employees alleging the bank actively and systematically deceived homeowners and sought foreclosures over modifications that would have kept borrowers in their homes. A seventh signed statement from a man who worked for one of the bank’s contractors reinforces the picture of a company-wide culture of putting profits over customers, even in defiance of facts.

The documents, first reported by Kimberly Miller of the Palm Beach Post, are part of a lawsuit over the bank’s handling of trial loan modifications under the Home Affordable Modification Program (HAMP) created by the Obama administration. The employees, whose work for the bank ranged from loan origination to collections to reviewing internal loan databases, swear that Bank of America used a variety of internal policies to discourage loan modifications and encourage foreclosures, even when loan documents visible to the employees showed the bank’s rationale for foreclosing was untrue. Those policies include:

‘Blitzing’: According to William Wilson, the bank conducted a “blitz” twice a month, instructing case managers to deny any HAMP application more than 60 days old, including “files [in] which the homeowner had provided all required financial documents and fully complied with the terms of a Trial Period Plan.”

$500 bonuses for filling foreclosure quotas: According to Simone Gordon, an employee “who placed ten or more accounts into foreclosure in a given month received a $500 bonus. Bank of America also gave employees gift cards to retail stores like Target or Bed Bath and Beyond as rewards for placing accounts into foreclosure.”

• Lying to clients about documentation: Gordon’s affidavit says it was bank policy to sit on financial documents borrowers submitted for 30 days, then label them “stale” and require the homeowner to re-apply. Bert Sheeks, the contract employee, was instructed “to find any pretext” to justify closing outstanding loan modification applications, “even in cases where we knew the borrower had, in fact, responded with complete documents.” Erika Brown “was instructed to inform every homeowner who called in that their file was ‘under review’” even when she could see no one had looked at the documents in question. Brown says she personally saw more than a hundred instances in which a bank official cancelled a loan modification due to “non payment” when the file showed all payments had been received on time.

The sum of the allegations is that the bank routinely falsified documents and knowingly foreclosed on borrowers who were in full compliance with modification plans. The program, which was the biggest federal initiative intended to alleviate the foreclosure crisis, should have helped 800,000 more homeowners than it did, according to a 2012 report.

Bank of America spokespeople say the allegations are false. The company has already “spent more than $45 billion to settle claims tied to its 2008 takeover of Countrywide Financial Corp,” the Boston Globe notes, and the top-to-bottom malfeasance alleged in this suit echoes allegations from 2011 that the bank paid to settle. Bank of America is far from alone in that regard, as many of the largest banks in the country have paid to settle allegations of abusive practices such as “robosigning.”

Despite such settlements, the government has prosecuted more protesters than it has banks involved in the foreclosure crisis, and abuses have continued.

Bank of America and other large banks that were supposed to harness HAMP funds to help resolve the foreclosure crisis were instead quite effective at using the program to boost their own balance sheets. The manipulation of the program depicted in these affidavits is more evidence that direct principal reduction would be a more effective use of federal housing funds than HAMP’s attempted partnership with banks.


This post originally credited Pro Publica, not the Palm Beach Post, as the first outlet to report on the affidavits.

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