From the NYT:
Bank of America, the nation’s biggest bank, said on Thursday that it planned to start charging customers a $5 monthly fee when they used their debit cards for purchases. It was just one of several new charges expected to hit consumers as new regulations crimp banks’ profits.
Wells Fargo and Chase are testing $3 monthly debit card fees. Regions Financial, based in Birmingham, Ala., plans to start charging a $4 fee next month, while SunTrust, another regional powerhouse, is charging a $5 fee.
The round of new charges stems from a rule, which takes effect on Saturday, that limits the fees that banks can levy on merchants every time a consumer uses a debit card to make a purchase. The rule, known as the Durbin amendment, after its sponsor Senator Richard J. Durbin, is a crucial part of the Dodd-Frank financial overhaul law.
Until now, the fees have been 44 cents a transaction, on average. The Federal Reserve in June agreed to cut the fees to a maximum of about 24 cents. While the fee amounts to pennies per swipe, it rapidly adds up across millions of transactions. The new limit is expected to cost the banks about $6.6 billion in revenue a year, beginning in 2012, according to Javelin Strategy and Research. That comes on top of another loss, of $5.6 billion, from new rules restricting overdraft fees, which went into effect in July 2010.
And even though retailer groups had argued that lower fees were important to keep prices in check, consumers were not likely to see substantial savings. In fact, they are simply going to end up paying from a different pot of money.
Or as Jamie Dimon, chief executive of JPMorgan Chase, put it after passage last year of the Dodd-Frank Act, “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.”
Chase is now charging customers for a paper statement. It also, like many other banks, scrapped its debit card rewards program. And customers that Chase inherited from Washington Mutual no longer enjoy free checking accounts.
The bank is also exploring a number of other fee increases, including for online banking, according to people with knowledge of the matter.
Bank of America’s debit fee is steeper than most of its competitors’, reflecting the broader challenges the bank is facing after the financial crisis. The bank has introduced an online-only account that charges customers for doing business at a local branch. It also plans to apply its new debit card fees to anyone who uses the card to make recurring payments like gym fees or cable bills.
Citibank is one of the few that said it would not introduce a charge for debit card use. “We have talked to customers and they have made it abundantly clear that ‘if you charge me to use my debit card, I would find that very irritating,’ ” said Stephen Troutner, head of Citi’s banking products. Still, the bank has made it more difficult to qualify for free checking, among other moves.
Earlier this year, Wells Fargo estimated that the Durbin rules would cost the bank $250 million in revenue every quarter. It hopes to make up half that gap with a variety of new products and customer fees, including the monthly debit card fee of $3. The change is part of a “pilot program” the bank will begin on Oct. 14 in five states across the country, including Washington and Georgia. As of Saturday, the bank will discontinue its debit card rewards program.
Meanwhile, HSBC said that it recently increased an A.T.M. fee — to $2.50 from $2 — for certain customers when they used a competitor’s A.T.M. It also recently introduced a debit transaction fee of 35 cents, though the first eight transactions are free.
And at TDBank, customers will now have to pay $2 for using A.T.M.’s outside their network.
“Durbin essentially moves the cost of debit away from merchants, and now it’s more focused on consumers,” said Beth Robertson, director of payments research at Javelin. “There are all sort of things happening where banks are saying, where can we put fees in place for our service to generate revenue or how can we reduce our costs?”
Over the last few years, consumers have increasingly shifted their spending to debit cards from credit cards, in large part to curb their spending. But some analysts predicted that the new fees could prompt consumers to return to credit cards — a more lucrative alternative for the banks...
Banks to Make Customers Pay Fee for Using Debit Cards
TARA SIEGEL BERNARD and BEN PROTESS
September 29, 2011
http://www.nytimes.com/2011/09/30/business/banks-to-make-customers-pay-debit-card-fee.html
Showing posts with label Bank of America. Show all posts
Showing posts with label Bank of America. Show all posts
Thursday, October 6, 2011
Sunday, August 21, 2011
Illegal Foreclosure Epidemic
Robo-signing foreclosure paperwork is a federal crime, but no bank or banker has even been charged.
Jim Hightower
August 15, 2011
http://www.otherwords.org/articles/illegal_foreclosure_epidemic
Two-year-olds often go running around the house too wildly and crash into something. They get an "ouchie" and fall down crying, but they learn from it.
That's the virtue of the "ouchie" that Bank of America, Goldman Sachs, JPMorgan Chase, Wells Fargo, and other big financiers got last year when they ran into the law after racing wildly through home foreclosure paperwork. They were caught falsifying thousands of documents and taking illegal shortcuts that were causing innocent families to lose their homes. They had to pay fines, make restitution, suspend foreclosures, and pledge to clean up their act. But at least they learned their lesson.
Oh, wait — these aren't two-year-olds. They are wily bankers, and the only lesson they ever seem to learn is that shortcuts can be profitable — as long as you don't get caught. But once again they've been caught rushing through foreclosures, using the same old scam called "robo-signing."
To foreclose on someone's home, an authorized bank employee must sign the foreclosure document, swearing that the facts in it are true. But that requires hiring people to review each case. To avoid that cost, they take an illegal shortcut by signing the name of someone who has not read the document and might not even exist.
In one Massachusetts county, for example, the signature of "Linda Green" has recently appeared on some 1,300 foreclosures. Curiously, her signature was written in many different styles, and she had many different titles. Also, there's no Linda Green presently working in the mortgage banking company involved. Meanwhile, state officials say that robo-signing is, once again, "an epidemic" all across the country.
It's a federal crime to do this, yet no bank or banker has even been charged. Until we put a CEO in jail, the banking barons will never learn their lesson.
Jim Hightower is a radio commentator, writer, and public speaker. He's also editor of the populist newsletter, The Hightower Lowdown.
Jim Hightower
August 15, 2011
http://www.otherwords.org/articles/illegal_foreclosure_epidemic
Two-year-olds often go running around the house too wildly and crash into something. They get an "ouchie" and fall down crying, but they learn from it.
That's the virtue of the "ouchie" that Bank of America, Goldman Sachs, JPMorgan Chase, Wells Fargo, and other big financiers got last year when they ran into the law after racing wildly through home foreclosure paperwork. They were caught falsifying thousands of documents and taking illegal shortcuts that were causing innocent families to lose their homes. They had to pay fines, make restitution, suspend foreclosures, and pledge to clean up their act. But at least they learned their lesson.
Oh, wait — these aren't two-year-olds. They are wily bankers, and the only lesson they ever seem to learn is that shortcuts can be profitable — as long as you don't get caught. But once again they've been caught rushing through foreclosures, using the same old scam called "robo-signing."
To foreclose on someone's home, an authorized bank employee must sign the foreclosure document, swearing that the facts in it are true. But that requires hiring people to review each case. To avoid that cost, they take an illegal shortcut by signing the name of someone who has not read the document and might not even exist.
In one Massachusetts county, for example, the signature of "Linda Green" has recently appeared on some 1,300 foreclosures. Curiously, her signature was written in many different styles, and she had many different titles. Also, there's no Linda Green presently working in the mortgage banking company involved. Meanwhile, state officials say that robo-signing is, once again, "an epidemic" all across the country.
It's a federal crime to do this, yet no bank or banker has even been charged. Until we put a CEO in jail, the banking barons will never learn their lesson.
Jim Hightower is a radio commentator, writer, and public speaker. He's also editor of the populist newsletter, The Hightower Lowdown.
Monday, August 15, 2011
New York Attorney General Accuses Bank Of New York Mellon Of Fraud
New York Attorney General Accuses Bank Of New York Mellon Of Fraud, Moves To Block Bank Of America's Mortgage Deal
Shahien Nasiripour
shahien@huffingtonpost.com
8/4/11
http://www.huffingtonpost.com/2011/08/04/new-york-attorney-general_n_919008.html
WASHINGTON -- New York Attorney General Eric Schneiderman asked a state judge to reject a proposed $8.5 billion settlement agreement over soured loans between Bank of America and a group of investors, claiming in court documents that a separate bank representing the investors committed fraud for failing to ensure that the mortgage securities were created in accordance with state law and for failing to act in the investors' best interest.
Bank of New York Mellon, the trustee representing the investors, "knowingly, repeatedly, and consistently" misled investors into thinking that the mortgage bonds were created properly, Schneiderman said in court documents. BNY Mellon also put its own interests before those of the investors it's supposed to represent, he said.
BNY Mellon, the 11th-largest U.S. bank by assets and one of the nation's largest trustees, stands accused of "repeated fraud and illegality," according to court filings, which alleges that the abuses "were repeated literally hundreds of times."
In short, Countrywide Financial, the lender purchased by BofA in 2008, failed to properly assemble loan documents needed for the creation of mortgage securities, and BNY Mellon effectively looked the other way, which "apparently triggered widespread fraud," Schneiderman said in court documents.
BNY Mellon should have known the mortgage securities were improperly created because the evidence was "abundant," Schneiderman asserted, citing the bank's own documents, news coverage of "foreclosure fraud" and foreclosure actions brought on the bank's behalf.
Schneiderman also accused Bank of America of fabricating the missing documents when it came to foreclosing on homeowners who defaulted on their mortgages.
There are "serious questions about the fairness and adequacy" of the proposed settlement agreement, Schneiderman said in court documents.
Spokesmen for Bank of America and BNY Mellon didn't immediately respond to emailed requests for comment.
The action throws a significant wrench into the accord, threatening Bank of America, the largest U.S. bank by assets, with billions of dollars in additional losses if the $8.5 billion deal with some of the world's largest investors is ultimately rejected.
It also opens up new worries for BofA, the nation's largest handler of home loans, as the company could be faced with the prospect of having New York's top legal officer determining that untold billions of dollars' worth of mortgages turned into securities by Countrywide, the nation's largest mortgage company when purchased by Bank of America during the credit crisis, aren't really securities at all due to failures in the security-creating process.
Schneiderman's actions also threaten Bank of New York Mellon, the trustee for those mortgage bonds, with unknown losses, as his office may determine that the firm didn't properly assemble and maintain critical loan documents necessary for mortgage instruments to become securities per New York state law. In his office's court filing, Schneiderman is asking to comb through additional mortgage documents to see if the rot he claims to have discovered is more widespread.
New York's top law enforcement officer has waged an aggressive campaign in trying to root out Wall Street wrongdoing during the housing bubble. Experts and federal bailout watchdogs have questioned whether lenders and other firms took the necessary steps when bundling home loans into securities. Sloppy practices were common, some analysts assert.
"If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever," Adam J. Levitin, a bankruptcy expert and professor at Georgetown University Law Center, told a congressional panel last November. Levitin said the problem could "cloud title to nearly every property in the United States" and could lead to trillions of dollars in losses.
In a New Jersey bankruptcy case last year, a Bank of America executive, Linda DeMartini, testified that Countrywide routinely did not convey crucial documents for loans sold to investors.
Schneiderman's action in the proposed BofA settlement is an extension of his investigation into Bank of America's mortgage securitization practices. The probe, first reported by The Huffington Post in June, is part of a larger inquiry that is scrutinizing whether mortgage companies and Wall Street firms took the necessary steps under New York state law when creating mortgage-backed securities, people with direct knowledge of the investigation said at the time.
Bank of America is seeking to end a months-long probe by state attorneys general and federal agencies into its mortgage and foreclosure practices. It's been in advanced negotiations with the government agencies, offering billions of dollars in mortgage aid for strapped homeowners in return for a release from liability for a host of alleged mortgage-related violations, The Huffington Post first reported on Tuesday.
Schneiderman's Thursday court filing objecting to Bank of America's proposed settlement with mortgage investors is a result of his office's investigation into mortgage irregularities. It's the kind of probe that could be stopped if his office agreed to such a release as is being contemplated for Bank of America in the state and federal settlement talks.
In court documents, Schneiderman is demanding that his agency be allowed to further examine loan documents to ensure the securities were properly created. New York's top law enforcement officer is using the Martin Act, a powerful state law that gives prosecutors broad powers to investigate fraud.
As trustee, BNY Mellon is charged with ensuring that companies involved in the mortgage-securitization chain properly assembled the needed documents to transform a bundle of home loans into a mortgage bond.
As the agent representing investors in those bonds, BNY Mellon owes them a fiduciary duty -- a legal obligation to act in their best interest.
The proposed settlement Schneiderman is seeking to disrupt involves claims from 22 institutional investors that had demanded Bank of America repurchase home loans packaged into 530 mortgage trusts with a original loan balance of $424 billion. The proposed $8.5 billion payout represents less than 4 cents on the dollar of the current unpaid balance, or about $220 billion.
The settlement offer, if approved by a New York state judge, would apply to all other investors in the trusts, extinguishing similar claims. In court filings, some of the other investors have already demanded the judge reject the proposed settlement agreement.
Schneiderman demanded that BNY Mellon compensate investors for its "fraudulent and deceptive acts."
Shahien Nasiripour
shahien@huffingtonpost.com
8/4/11
http://www.huffingtonpost.com/2011/08/04/new-york-attorney-general_n_919008.html
WASHINGTON -- New York Attorney General Eric Schneiderman asked a state judge to reject a proposed $8.5 billion settlement agreement over soured loans between Bank of America and a group of investors, claiming in court documents that a separate bank representing the investors committed fraud for failing to ensure that the mortgage securities were created in accordance with state law and for failing to act in the investors' best interest.
Bank of New York Mellon, the trustee representing the investors, "knowingly, repeatedly, and consistently" misled investors into thinking that the mortgage bonds were created properly, Schneiderman said in court documents. BNY Mellon also put its own interests before those of the investors it's supposed to represent, he said.
BNY Mellon, the 11th-largest U.S. bank by assets and one of the nation's largest trustees, stands accused of "repeated fraud and illegality," according to court filings, which alleges that the abuses "were repeated literally hundreds of times."
In short, Countrywide Financial, the lender purchased by BofA in 2008, failed to properly assemble loan documents needed for the creation of mortgage securities, and BNY Mellon effectively looked the other way, which "apparently triggered widespread fraud," Schneiderman said in court documents.
BNY Mellon should have known the mortgage securities were improperly created because the evidence was "abundant," Schneiderman asserted, citing the bank's own documents, news coverage of "foreclosure fraud" and foreclosure actions brought on the bank's behalf.
Schneiderman also accused Bank of America of fabricating the missing documents when it came to foreclosing on homeowners who defaulted on their mortgages.
There are "serious questions about the fairness and adequacy" of the proposed settlement agreement, Schneiderman said in court documents.
Spokesmen for Bank of America and BNY Mellon didn't immediately respond to emailed requests for comment.
The action throws a significant wrench into the accord, threatening Bank of America, the largest U.S. bank by assets, with billions of dollars in additional losses if the $8.5 billion deal with some of the world's largest investors is ultimately rejected.
It also opens up new worries for BofA, the nation's largest handler of home loans, as the company could be faced with the prospect of having New York's top legal officer determining that untold billions of dollars' worth of mortgages turned into securities by Countrywide, the nation's largest mortgage company when purchased by Bank of America during the credit crisis, aren't really securities at all due to failures in the security-creating process.
Schneiderman's actions also threaten Bank of New York Mellon, the trustee for those mortgage bonds, with unknown losses, as his office may determine that the firm didn't properly assemble and maintain critical loan documents necessary for mortgage instruments to become securities per New York state law. In his office's court filing, Schneiderman is asking to comb through additional mortgage documents to see if the rot he claims to have discovered is more widespread.
New York's top law enforcement officer has waged an aggressive campaign in trying to root out Wall Street wrongdoing during the housing bubble. Experts and federal bailout watchdogs have questioned whether lenders and other firms took the necessary steps when bundling home loans into securities. Sloppy practices were common, some analysts assert.
"If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever," Adam J. Levitin, a bankruptcy expert and professor at Georgetown University Law Center, told a congressional panel last November. Levitin said the problem could "cloud title to nearly every property in the United States" and could lead to trillions of dollars in losses.
In a New Jersey bankruptcy case last year, a Bank of America executive, Linda DeMartini, testified that Countrywide routinely did not convey crucial documents for loans sold to investors.
Schneiderman's action in the proposed BofA settlement is an extension of his investigation into Bank of America's mortgage securitization practices. The probe, first reported by The Huffington Post in June, is part of a larger inquiry that is scrutinizing whether mortgage companies and Wall Street firms took the necessary steps under New York state law when creating mortgage-backed securities, people with direct knowledge of the investigation said at the time.
Bank of America is seeking to end a months-long probe by state attorneys general and federal agencies into its mortgage and foreclosure practices. It's been in advanced negotiations with the government agencies, offering billions of dollars in mortgage aid for strapped homeowners in return for a release from liability for a host of alleged mortgage-related violations, The Huffington Post first reported on Tuesday.
Schneiderman's Thursday court filing objecting to Bank of America's proposed settlement with mortgage investors is a result of his office's investigation into mortgage irregularities. It's the kind of probe that could be stopped if his office agreed to such a release as is being contemplated for Bank of America in the state and federal settlement talks.
In court documents, Schneiderman is demanding that his agency be allowed to further examine loan documents to ensure the securities were properly created. New York's top law enforcement officer is using the Martin Act, a powerful state law that gives prosecutors broad powers to investigate fraud.
As trustee, BNY Mellon is charged with ensuring that companies involved in the mortgage-securitization chain properly assembled the needed documents to transform a bundle of home loans into a mortgage bond.
As the agent representing investors in those bonds, BNY Mellon owes them a fiduciary duty -- a legal obligation to act in their best interest.
The proposed settlement Schneiderman is seeking to disrupt involves claims from 22 institutional investors that had demanded Bank of America repurchase home loans packaged into 530 mortgage trusts with a original loan balance of $424 billion. The proposed $8.5 billion payout represents less than 4 cents on the dollar of the current unpaid balance, or about $220 billion.
The settlement offer, if approved by a New York state judge, would apply to all other investors in the trusts, extinguishing similar claims. In court filings, some of the other investors have already demanded the judge reject the proposed settlement agreement.
Schneiderman demanded that BNY Mellon compensate investors for its "fraudulent and deceptive acts."
Tuesday, August 9, 2011
B of A Signs HUD Pact Over Mortgage Abuse
Kate Berry and Jeff Horwitz
AUG 4, 2011
http://www.americanbanker.com/issues/176_151/stevens-fha-bank-of-america-gaither-hud-mortgage-settlement-1040918-1.html
The Department of Housing and Urban Development has reached a settlement with Bank of America that releases the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages.
The agreement, a draft of which was obtained by American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures.
B of A's pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
"Our total costs for the program will be multiples of that" $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to "ensure these customers have every opportunity to stay in their homes," he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
"We took the borrowers into account first," said HUD general counsel Helen Kanovsky. "We think that that's really the best thing for the FHA [insurance] fund as well."
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
"We fought for as narrow a [legal] release as possible and as much money as possible," Kanovsky said.
Under HUD's standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
The agreement was signed July 11 by B of A senior vice president Robert Gaither, who directed queries to a company spokesman.
All of the 57,000 borrowers covered by the agreement are 12 to 24 months delinquent. They account for only 4% of the total 1.5 million FHA loans that B of A services but a substantial portion of the company's seriously delinquent loans. B of A holds $19.8 billion in FHA-insured loans that are 90 days or more delinquent, and another $3.1 billion in FHA loans 31 to 89 days delinquent, the bank said in its second-quarter earnings release.
Under its terms with HUD, B of A will have to pay an independent monitor to review its modification work and report to HUD. It is also obligated to seek borrowers through database searches, letters, phone queries and visits to properties. Borrowers who fail to qualify for loan modifications, will receive from B of A $4,000 for a short sale and $7,500 for a deed-in-lieu of foreclosure.
The deal reflects the high levels of financial uncertainty surrounding such negotiations. In May, B of A agreed to pay $20 million, or double the minimum for the latest settlement, for improperly foreclosing on a relatively few 160 homes of military service members.
The settlement is "not a lot of money for the potential losses that the federal government may have to make good on," said Diane Thompson, an attorney for the National Consumer Law Center.
The minimum $10 million payment of borrowers' arrearages is unlikely to defray the FHA's losses on foreclosures, she said.
But if Bank of America is "able to identify the loans, and if people are still in the homes, and if they waive payments over past 12 months, then that's more valuable than a big fine for Bank of America," Thompson said. "But there are a lot of ifs there."
The largest banks hold billions of dollars of delinquent FHA loans on their balance sheets for which they have not yet filed claims. This may be because of concerns that they may have violated stringent HUD servicer requirements and could be held liable for treble damages related to false claims. One sticking point in settling such claims is that the FHA requires all servicers to have employees conduct face-to-face interviews with FHA borrowers once they become 60 days delinquent, a procedure most servicers either did not undertake or cannot document.
As part of the deal HUD has also agreed to pay any mortgage insurance claims and waive any pending administrative actions against B of A, its officers, directors or employees "in connection with servicing or loss mitigation deficiencies." The only exclusion is for allegations involving improper transfers of titles.
B of A also has agreed not to claim expenses on any FHA insurance claims for taxes, liens or property preservation incurred from November 2010 through July 2011.
AUG 4, 2011
http://www.americanbanker.com/issues/176_151/stevens-fha-bank-of-america-gaither-hud-mortgage-settlement-1040918-1.html
The Department of Housing and Urban Development has reached a settlement with Bank of America that releases the company from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent government-insured mortgages.
The agreement, a draft of which was obtained by American Banker, was previously undisclosed. It has been forged on a separate but parallel track from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures.
B of A's pact with HUD requires it to waive a minimum of $10 million in unpaid mortgage payments and vet each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative.
"Our total costs for the program will be multiples of that" $10 million minimum, B of A spokesman Dan Frahm said. The deal calls for measures to "ensure these customers have every opportunity to stay in their homes," he added.
After such outreach, the settlement paves the way for B of A to foreclose on homes that borrowers could not afford even after a mortgage modification and those that have been left vacant by owners.
In forging the agreement, HUD decided to forgo steep monetary damages or admissions of error from the bank.
Instead, it pushed for the lender to implement steps that in most cases it was supposed to have already taken under the terms of its FHA-guaranteed loans, with the apparent aim of minimizing foreclosures and related insurance claims.
"We took the borrowers into account first," said HUD general counsel Helen Kanovsky. "We think that that's really the best thing for the FHA [insurance] fund as well."
The agreement is HUD's first involving settlement of claims in which a servicer failed to offer loss mitigation to borrowers. It does not, however, prevent HUD from seeking damages from B of A for unrelated origination and servicing failures.
"We fought for as narrow a [legal] release as possible and as much money as possible," Kanovsky said.
Under HUD's standard terms, borrowers must be less than 12 months delinquent to qualify for loan modifications. With the B of A settlement, the minimum of $10 million the bank agreed to pay will go to covering past-due arrearages and giving borrowers who are more than a year behind the possibility of qualifying for foreclosure alternatives.
The agreement was signed July 11 by B of A senior vice president Robert Gaither, who directed queries to a company spokesman.
All of the 57,000 borrowers covered by the agreement are 12 to 24 months delinquent. They account for only 4% of the total 1.5 million FHA loans that B of A services but a substantial portion of the company's seriously delinquent loans. B of A holds $19.8 billion in FHA-insured loans that are 90 days or more delinquent, and another $3.1 billion in FHA loans 31 to 89 days delinquent, the bank said in its second-quarter earnings release.
Under its terms with HUD, B of A will have to pay an independent monitor to review its modification work and report to HUD. It is also obligated to seek borrowers through database searches, letters, phone queries and visits to properties. Borrowers who fail to qualify for loan modifications, will receive from B of A $4,000 for a short sale and $7,500 for a deed-in-lieu of foreclosure.
The deal reflects the high levels of financial uncertainty surrounding such negotiations. In May, B of A agreed to pay $20 million, or double the minimum for the latest settlement, for improperly foreclosing on a relatively few 160 homes of military service members.
The settlement is "not a lot of money for the potential losses that the federal government may have to make good on," said Diane Thompson, an attorney for the National Consumer Law Center.
The minimum $10 million payment of borrowers' arrearages is unlikely to defray the FHA's losses on foreclosures, she said.
But if Bank of America is "able to identify the loans, and if people are still in the homes, and if they waive payments over past 12 months, then that's more valuable than a big fine for Bank of America," Thompson said. "But there are a lot of ifs there."
The largest banks hold billions of dollars of delinquent FHA loans on their balance sheets for which they have not yet filed claims. This may be because of concerns that they may have violated stringent HUD servicer requirements and could be held liable for treble damages related to false claims. One sticking point in settling such claims is that the FHA requires all servicers to have employees conduct face-to-face interviews with FHA borrowers once they become 60 days delinquent, a procedure most servicers either did not undertake or cannot document.
As part of the deal HUD has also agreed to pay any mortgage insurance claims and waive any pending administrative actions against B of A, its officers, directors or employees "in connection with servicing or loss mitigation deficiencies." The only exclusion is for allegations involving improper transfers of titles.
B of A also has agreed not to claim expenses on any FHA insurance claims for taxes, liens or property preservation incurred from November 2010 through July 2011.
Subscribe to:
Posts (Atom)
