It didn’t take long after the announcement of the $17 billion settlement deal with Bank of America over mortgage abuses committed by its executives, as well as those at Countrywide and Merrill Lynch, for pundits to decry it as an attack on big business by an overzealous regulatory agency.
However, our Miami foreclosure lawyers recognize that what this firm will have to pay still does not make whole all of those affected. What’s more, Bank of America still profited more from its actions than what it will pay out.
But it’s also important to remind these naysayers of what Bank of America and its subsidiaries actually did wrong. The U.S. Justice Department did not pursue Bank of America because it was an easy target. In fact, to the contrary.
In a 30-page statement of facts, the DOJ laid out exactly what the company had done to draw the attention of federal prosecutors. Broadly stated, the company removed an ever-increasing number of underwriting requirements and standards, but actively sought to conceal this fact from investors.
For example, at Countrywide, the firm had a “Structured Loan Desk.” This was where loans that failed to meet traditional guidelines were sent for review. This desk would approve requests for exceptions based on what was termed “shadow guidelines.” That is, underwriters granted approval to loans that failed to meet traditional loan-to-value criteria, as well as those where it was clear the applicant homeowner didn’t meet the necessary credit criteria.
In the event an applicant failed to meet even the standards of those shadow guidelines, the loan request would be forwarded on to the “Secondary Market Structured Loan Desk.” There, the desk would weigh whether some secondary market might buy the loan. If so, it was returned to the underwriter for approval.
It became corporate policy to allow exceptions on all mortgages, so long as the balance was under $3 million. In 2006, underwriters were not only pushed to make exceptions, they were also released of the responsibility to note the risks these exceptions created. Internal e-mail show executives were aware these loans were collectively a “hazardous product,” and urged the firm to sell them so that the bank would not be “left with credit risk.”
Better to push that on to the American public, right? And of course, the bottom did fall out, playing a major role in the perpetuation of the worst economic downturn our country had seen since the Great Depression.
Merril Lynch, meanwhile, was fully aware that its loans were a serious risk to those in the secondary market. In fact, credit reviews had proven nearly half of loan samples weren’t compliant with federal regulations on underwriting. In many cases, loan files were missing important documents. Yet, when representing the strength of these bundled loans to investors, Merrill Lynch insisted there were justifications for the exceptions.
When Bank of America acquired both firms (Countrywide in 2008 and Merrill Lynch in 2009), it automated a number of the companies’ custom technologies. Then, Bank of America went on to make its own questionable loans, which also failed to meet the standards set by the Federal Housing Administration. One example highlighted was that of a $157,000 loan that was backed by a mobile home that was 24 years-old. Aside from that, the borrower was delinquent on the loan for the mobile home when he requested a new loan, and he was also improperly allowed to roll in $13,000 worth of auto and credit card debt. The borrower made just two payments on the new loan before defaulting – which should have shocked no one.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
What Bank of America Actually Did Wrong, Aug. 28, 2014, By Bonnie Sinnock, National Mortgage News
More Blog Entries:
Many Underwater Homeowners in Florida Unlikely to Benefit From $17B Deal, Aug. 31, 2014, Miami Foreclosure Lawyer Blog