By Haddon Libby
In February 2012, the five largest mortgages lenders in the United States (Ally Bank, Bank of America, Citibank, Chase and Wells Fargo) agreed to pay $25 billion because of the illegal way that they were foreclosing on many properties. The banks were signing foreclosure documents without having a notary public present or knowing whether the documents being signed were accurate. ‘Robo-signers’ might sign 10,000 documents daily with many bank signers being temporary workers with no understanding of the documents that they were signing.
As part of the National Mortgage Settlement, $17 billion was to be used for principal reductions on loan modifications. Some additional monies were also to be used to improve the treatment of their borrowers.
Bank of America and Wells Fargo are cited as the two worst offenders of the settlement with behaviors that are so bad that New York Attorney General Eric Schneidermann has taken Wells Fargo to court and “closely monitors” Bank of America for compliance with agreed to modifications in their practices. The lawsuit claims that Wells Fargo delays in loan modification processing are “Kafkaesque”. In a press conference announcing the lawsuit, Schneidermann gave example after example of obstructive practices by the bank meant to delay and frustrate homeowners seeking relief.
Tim and Lindey Craft are a classic example of the problem that has caused the lawsuit. The couple was hit with financial problems due to health problems and unemployment. They began negotiating with Bank of America for a loan modification which the bank delayed repeatedly because of lost paperwork. In the middle of the process, Bank of America sold the loan to another bank. At this point, the Craft’s got in touch with CHES, a nonprofit group that helps couples like the Craft’s . The loan is finally being modified albeit without the help of Bank of America.
Then there is the case of Warren and Mary Houghland who declared bankruptcy. A judge dismissed home loan debt of $227,000 to Bank of America as part of a loan modification arrangement. The bank did not like the ruling and subsequently sent the Houghland’s a barrage of payment notices that included notices with false payment amounts, inflated and inaccurate interest rates and “holdover” payments from before the bankruptcy. Judge Jennemann eventually fined the bank $220,000 for not obeying court orders.
The same happened to Edwin and Michelle Ramos. Bank of America harassed this couple for payments despite a bankruptcy court dismissing the debt. The ruling did not dissuade the bank from making constant phone calls and letters for repayment. Judge Drain decided to send the bank “a message” and fined the bank $10,000 a month plus the Ramos’ attorney fees until the bank ceases its harassment of the couple. In his ruling, Judge Drain added, “This is not just a stupid mistake. This is a policy.”
These situations point out a core problem with the landmark settlement – there is no enforcement mechanism to insure that the banks are honoring the settlement. To enforce the settlement, people have to get attorneys and fight the banks in court. Given the limited financial means of most of these people, this is an unlikely occurrence which allows the banks to continue behaving badly.
Michael Schwartz, the attorney for the Ramos family says, “This is a national problem” that is “happening all over the place.” “Why is BofA doing this? Because they can.”
If you are having problems with a loan modification, call or email the California’s Attorney General’s office at 916.322.3360 or oag.ca.gov, visit NationalMortgageSettlement.com or MortgageOversight.com.
If you have a complaint on any financial product or service, contact the Consumer Financial Protection Bureau at ConsumerFinance.gov or by calling 855.411.2372.
