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Editor’s Comment:
By William C. Veal, Esq.
vealbuzz@aol.com
As we see the progress, or lack thereof, of the investigation into the massive scan called Foreclosure in our country, we read many articles by various people regarding the current status of investigations and attempted solutions. See the two articles below.
One article, by Jessica Bye reports on two “whistle blowers” who state that BoA defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans. In one of the lawsuits, it states, “In other words, BoA has had it both ways. BoA has continued to maximize the value of its mortgage portfolio with anti-HAMP (Home Affordable Modification Program) modification practices and then make money by committing fraud on the homeowner”. Obviously, lawsuits are brought by those who believe they have a strong position to bring to task the wrongdoer. Those who have been foreclosed on improperly have the same sense of being wronged and have a right, if not an obligation, to present their cases to the courts. While the mortgage companies have substantial assets with which to pursue their claimed remedies against the individual homeowners, those same homeowners are often befuddled by the flood of paper work and the myriad of legal documents with which they are confronted. They rarely have the assets with which to determine whether or not “robo-signing” was used or whether or not the proper documents exist which would allow a legitimate foreclosure by a financial institution. Accordingly, many homeowners are set out of their homes without knowing the full extent of their rights against the mortgage company.
While extensive litigation and negotiation is underway, and has been for an extended period of time, various resolutions which, it appears to me, still benefit the mortgage lenders, are on the horizon. One of the most interesting descriptions was written by Andrew Dunn. See the second article below. He addressed the issue of converting mortgages to leases. While the details of this program are not confirmed and therefore unavailable, it would appear by the mere wording of converting mortgages to lease hold interests, the homeowner, it appears to me, is once again on the losing end of that arrangement. While there are positives such as the homeowner being allowed to remain in their residence, the loss would be considerable to the homeowner forfeiting all ownership interest. This would be particularly true if the mortgage documents could be called into question. It would appear that the homeowner loses any rights that he may have had should the documentation be faulty. Homeowners would be unable to negotiate their interests, much less protect them. Obviously, if the economy begins to show substantial growth, then the investors would be the ones who reap the profit. Unfortunately, I have been unable to determine whether or not such mortgages converted to leases would be long term or short term contracts and what modifications, if any, would be available to the leaseholder. Obviously, “evicting a renter” is legally less difficult than a foreclosure process.
It still seems to me that the tap dancing is only becoming more and more refined and shows little promise of real resolution to the problems facing homeowners today.
Whistleblower says BofA defrauded HAMP
By Jessica Dye
NEW YORK, March 7 (Reuters) – Bank of America NA prevented homeowners from receiving mortgage-loan modifications under a federal program in order to avoid millions of dollars in losses while benefitting from financial incentives for participating in the program, according to a complaint unsealed in federal court Wednesday.
The suit is the second whistleblower complaint unsealed so far with apparent ties to the $1 billion False Claims Act settlement announced by Bank of America and the U.S. Attorney’s Office for the Eastern District of New York on February 9.
The Bank of America settlement is also part of the sweeping $25 billion agreement reached between state and federal authorities.
Final settlement documents have yet to be filed in the BoA settlement, which the U.S. Attorney’s Office said was the largest ever False Claims Act payout related to mortgage fraud.
The settlement resolved claims that Bank of America’s Countywide Financial subsidiaries defrauded the Federal Housing Administration by inflating appraisals used for government-insured home loans, as well as claims involving the Home Affordable Modification Program, a federal program to help American homeowners facing foreclosure.
The complaint unsealed Wednesday was filed by whistleblower
Gregory Mackler, a Colorado resident who said he worked
alongside Bank of America executives while an employee at Urban
Lending Solutions, a company to which Bank of America contracted
some of its HAMP work.While working at Urban Lending, Mackler said he saw BofA and its loan servicing subsidiary, BAC Homes Loans Servicing LP, implement “business practices designed to intentionally prevent scores of eligible homeowners from becoming eligible or staying
eligible for permanent HAMP modification.”The bank and its agents routinely pretended to have lost homeowners’ documents, failed to credit payments during trial modifications and intentionally misled homeowners about their eligibility for the program, the complaint alleged.
BoA let through just enough HAMP modifications to avert suspicion and allay congressional critics, while not enough to incur any substantial losses to its own bottom line, according to the complaint.
“In other words, BoA has had it both ways. BoA has continued to maximize the value of its mortgage portfolio with anti-HAMP modification practices and managed to make money by committing fraud on homeowner,” the lawsuit said.
A lawyer for Mackler could neither confirm nor deny that the complaint was tied to the settlement. A spokesman for the U.S. attorney’s office and a representative for Bank of America declined to comment.
In February, a whistleblower complaint was unsealed from Kyle Lagow, a former employee in a Countrywide appraisal unit which detailed allegations of Countrywide’s “corrupt underwriting and appraisal process.” Bank of America purchased Countywide in June 2008
Under the False Claims Act, successful whistleblower complaints can earn that whistleblower up to 25 percent of the
settlement amount.
According to the docket, the U.S. Department of Justice has until March 16 to decide whether to intervene in both the Mackler and Lagow case. The case is United States of America v. Bank of America NA et al., in the U.S. District Court for the Eastern District of New York, no. 11-3270.
Bank of America eyes turning troubled homeowners into renters
Bank of America is exploring a program that would allow homeowners on the brink of foreclosure to remain in their homes by becoming renters.
Such an ambitious program likely would draw interest from thousands of families still struggling with their mortgages. But it faces many hurdles and is unlikely to get off the ground nationwide.
The Charlotte-based bank has applied for a trademark for the phrase “Mortgage to Lease,” presumably what would become the name of the program.
The name of the program seemingly coincides with comments made by the head of the unit dealing with Bank of America’s troubled mortgages, Ron Sturzenegger, late last year. In an interview with housing finance news service HousingWire, he said the bank is exploring programs that would involve a short sale to an investor who would then lease it back.
While confirming that the bank is in the very early stages of exploring such a program, Bank of America spokesman Dan Frahm said nothing has been announced or is imminent.
He said the bank frequently applies for trademarks for program names that never come to pass.
Bank of America has been struggling under the weight of thousands of delinquent mortgages, the majority acquired through the bank’s 2008 acquisition of Countrywide Financial Corp. The division lost $18 billion in 2011, according to the bank’s annual report filed this week.
While the bank has been working through bad loans, it still had more than $150 billion in its portfolio at year’s end.
The bank already offers a number of standard refinancing and other foreclosure prevention programs.
A mortgage to lease program would be much more ambitious. While similar programs have been tested in smaller areas, none have been offered nationwide, said Guy Cecala, publisher of Inside Mortgage Finance.
There is no shortage of investors willing to buy properties. The trick would be to make the math work for all parties involved.
Such a program generally ends up as a good deal to the homeowner. The family gets to stay in their home, and the debt is settled for less than what they owe while avoiding a more damaging impact on their credit score.
The bank or investor, though, becomes a landlord, complete with responsibilities for upkeep, maintenance, insurance and taxes.
But a bank would see some benefits from a program. It would avoid the labor-intensive, costly foreclosure process, and evicting a renter is generally easier than foreclosing on a homeowner.
Cecala said he doesn’t expect Bank of America’s program – which would take years to develop – to come to pass.
“People like it in theory,” he said. “But when you start thinking about the logistics involved, it gets very complicated and perhaps not workable.”
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