“When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.” – BOA employee
EDITOR’S ANALYSIS: The first thing to say about this is that these lawsuits give voice to the hundreds of thousands of homeowners who in good faith attempted a work-out on their mortgage without looking to get a “free house.”
The second thing to say is that the lawsuits miss the essential point — the homeowners were talking to the wrong people (BofA, BAC et al), who had no authority, no financial interest in a performing loan and no ownership of the obligation, note or mortgage. The plain truth is that the payments and/or proceeds arising out of obligations related to the originated loan transaction represents money that is not and never was owed to the Bank.
Even if the Bank could conjure up a cause of action against the homeowner, it would only be for the amounts that the Bank actually lost and it would be an unsecured claim because they do not now nor will they ever have a valid note and mortgage in which they are the creditor. It would be a cause of action in equity for unjust enrichment or some such thing. They couldn’t claim that they were subrogated to the claim of the real creditor without disclosing the identity of the real creditor.
So they are stuck between a rock and a hard place only in the sense that they are being blocked from ill-gotten gains. BOA never lent the money for the loan and so there never was any obligation owed to BOA when the loan transaction was originated. BOA was not the payee on the note so they have no action on that either. BOA is not named on the mortgage, but even if they were, they still would have no rights under the mortgage because the mortgage secures the note, on which BOA is NOT the payee. BOTTOM LINE: THESE OBLIGATIONS ARE UNSECURED AND UNLIQUIDATED UNLESS AND UNTIL A FULL ACCOUNTING IS MADE OF ALL PAYMENTS RECEIVED FROM THE BORROWER, AND ALL PAYMENTS MADE FROM THIRD PARTIES ON NON-SUBROGATED CLAIMS.
If they modified the terms of a valid mortgage they would be changing the deal with the investors without their consent. If they modified the terms of a valid mortgage they would need signatures not only from the homeowners, but from the creditor, whose identity is now hopelessly obscured by the dissolution and repackaging of the “pools” of “loans” into other vehicles. (Of course the problems get deeper when upon analysis a title examiner would discover that neither the note nor the mortgage were valid when executed and that the “pools” were and remain empty if they still exist).
And THAT is why these attorney generals are saying that it was fraud to tell borrowers that they had to be in default to get a modification.
Virtually ANY meaningful modification would change the deal that was sold to investors. Such modifications would be construed as an admission that the loans were defective in the first instance.
The ONLY interest the Bank had was to keep people defaulting on their mortgages so that the Bank would receive higher fees for servicing a non-performing loan, and, more importantly, to trigger the provisions in the securitization documents that would allow them to make the payments otherwise due from the borrower and then collect the extra fees, costs and payments through foreclosure — using a self serving accounting to the investors that showed that the proceeds were zero or close to zero, thus entitling a servicer to obtain ownership of a home by way of a foreclosure on a loan it never made.
And THAT is why the credit bid at the auction is not made in the name of anyone with even a colorable right to claim creditor status and why the credit bid is void. And THAT is why the title ends up in yet another layer of bankruptcy remote vehicles. AND THAT is why virtually ALL sales in all states — judicial and non-judicial — resulted in defective and clouded titles.
If BOA wanted to bid on the property and they had a right to do so, they would have no need to use various sham corporations to bid and take title. But they wanted to buy the property without using or spending any money. So they invented a procedure whereby they show up at the auction where nobody seems to know what they are doing, and they submit the only bid, which is deemed a credit bid because the auctioneer is not sophisticated enough to realize that the bid is coming from a non-creditor, or the auctioneer is in on the game.
But, in order for all that to work, the loans had to be treated as though they were in default even though they were not — the creditor was getting paid according to the distribution reports, with the payment coming from the servicer, just as it was set forth in the securitization documents (whether the borrower was paying or not). So they needed an organized procedure to make certain that as many loans as possible were declared in default, and with most borrowers not contesting the procedure, they got away with it most of the time.
In the small number of cases where the borrower secured the services of a knowledgeable attorney, there were extravagant settlements to both the borrower and the lawyer under agreements of confidentiality. But those confidentiality agreements are not enforceable because it was an agreement to commit an illegal act — which resulted in corrupting the chain of title.
The attorneys general of Arizona and Nevada on Friday filed a lawsuit against Bank of America, accusing it of engaging in “widespread fraud” by misleading customers with “false promises” about their eligibility for modifications on their home mortgages.
In withering complaints filed in state courts in both states, the attorneys general accused Bank of America of assuring customers that they would not be foreclosed upon while they were seeking loan modifications, only to proceed with foreclosures anyway; of falsely telling customers that they must be in default to obtain a modification; of promising that the modifications would be made permanent if they completed a trial period, only to renege on the deal; and of conjuring up bogus reasons for denying modifications.
“Bank of America’s callous disregard for providing timely, correct information to people in their time of need is truly egregious,” Catherine Cortez Masto, the attorney general of Nevada said in a statement.
Many Nevada homeowners continued “to make mortgage payments they could not afford, running through their savings, their retirement funds or their children’s education funds.”
The lawsuit comes as top prosecutors nationwide are investigating whether the paperwork that banks used to support foreclosure cases often was egregiously sloppy, sometimes relying on robo-signers — employees who signed hundreds of documents a day — to sign sworn court documents.
Tom Miller, Iowa’s attorney general who is heading the multistate investigation into foreclosure fraud allegations, said the two states’ lawsuits would not dilute his inquiry. “It is clear that attorneys general in Arizona and Nevada believe that it is in their two states’ best interests to pursue coordinated civil cases against Bank of America,” he said in a statement.
A Bank of America spokesman, Dan Frahm, said bank officials were disappointed that the lawsuits were filed “at this time,” given the bank’s cooperation with the multistate investigation.
Mr. Frahm disputed the allegations in the lawsuit, saying the bank was committed to making sure no property was foreclosed until the customer had a chance to modify the loan or, if ineligible for a modification, to pursue another solution.
He said the attorneys general didn’t acknowledge the many improvements the bank had made, like providing a single point of contact for customers who have started the modification process and increasing staff to support “homeownership retention initiatives.”
Arizona and Nevada are among the states hardest hit by the housing downturn, and the state attorneys general said their lawsuits were prompted by hundreds of complaints by consumers who sought modifications of their mortgages.
The complaints in the lawsuit in many ways echoed problems encountered by homeowners nationwide who have tried with little luck to obtain mortgage modifications from banks, often through a federal program set up for that purpose. Thousands of homeowners complain that banks repeatedly lose their documents, fail to return calls or foreclose when a homeowner believes he or she is still negotiating a modification.
Indeed, according to the lawsuits, Bank of America’s efforts were the most anemic of the big banks and were not confined to the Western states but rather “reflect a pervasive nationwide pattern and practice of conduct.” The lawsuit noted that Bank of America ranked last in “virtually every homeowner experience metric” monitored in a monthly report on the federal home loan modification program.
Ms. Masto of Nevada said her office’s findings were confirmed by interviews with consumers, former employees, third parties and documents. Former employees said that Bank of America’s modification staff was “chaotic, understaffed and not oriented to customers,” according to a news release. One former employee said, “The main purpose of the training is to teach us how to get customers off the phone in less than 10 minutes.”
Another employee said, “When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.”
The Arizona complaint cites the case of an Apache Junction couple who faced foreclosure. When the wife called the bank, a representative told her ‘not to worry,’ there was a stop order on the foreclosure and the couple’s loan modification package would arrive the next day. The next day the homeowner learned that her house had already been sold, the suit says.
Terry Goddard, attorney general of Arizona, said the lawsuit was filed in part because the bank had violated the terms of a 2009 consent decree that Countrywide Home Loans — which Bank of America purchased in 2008 — had engaged in “widespread consumer fraud” in originating and marketing mortgages. As part of the judgment, Countrywide had agreed to create a loan modification program for some Arizona homeowners.
Mr. Goddard, a Democrat who lost a bid for governor, will leave office in January.
