Bank of America Whistle-Blower’s Bombshell: “We Were Told to Lie”
June 19, 2013
David Dayen
Bank of America’s mortgage
servicing unit systematically lied to homeowners, fraudulently denied
loan modifications, and paid their staff bonuses for deliberately
pushing people into foreclosure: Yes, these allegations were suspected
by any homeowner who ever had to deal with the bank to try to get a loan
modification – but now they come from six former employees and one
contractor, whose sworn statements were added last week to a civil
lawsuit filed in federal court in Massachusetts.
“Bank of America’s practice is to string
homeowners along with no apparent intention of providing the permanent
loan modifications it promises,” said Erika Brown, one of the former
employees. The damning evidence would spur a series of criminal
investigations of BofA executives, if we still had a rule of law in this
country for Wall Street banks.
The government’s Home Affordable
Modification Program (HAMP), which gave banks cash incentives to modify
loans under certain standards, was supposed to streamline the process
and help up to 4 million struggling homeowners (to date, active
permanent modifications number about 870,000). In reality, Bank of
America used it as a tool, say these former employees, to squeeze as
much money as possible out of struggling borrowers before eventually
foreclosing on them. Borrowers were supposed to make three trial payments before the loan modification became permanent; in actuality, many borrowers would make payments
for a year or more, only to find themselves rejected for a permanent
modification, and then owing the difference between the trial
modification and their original payment. Former Treasury Secretary Timothy Geithner famously described HAMP as a means to “foam the runway” for the banks, spreading out foreclosures so banks could more readily absorb them.
These Bank of America employees offer
the first glimpse into how they pulled it off. Employees, many of whom
allege they were given no basic training on how to even use HAMP, were
instructed to tell borrowers that documents were incomplete or missing
when they were not, or that the file
was “under review” when it hadn’t been accessed in months. Former
loan-level representative Simone Gordon says flat-out in her affidavit
that “we were told to lie to customers” about the receipt of documents
and trial payments. She added that the bank would hold financial
documents borrowers submitted for review for at least 30 days. “Once
thirty days passed, Bank of America would consider many of these
documents to be ‘stale’ and the homeowner would have to re-apply for a
modification,” Gordon writes. Theresa Terrelonge, another ex-employee,
said that the company would consistently tell homeowners to resubmit information, restarting the clock on the HAMP process.
Worse than this, Bank of America would
simply throw out documents on a consistent basis. Former case management
supervisor William Wilson alleged that, during bimonthly sessions
called the “blitz,” case managers and underwriters would simply deny any
file with financial documents that were more than 60 days old. “During a
blitz, a single team would decline between 600 and 1,500 modification
files at a time,” Wilson wrote. “I personally reviewed hundreds of files
in which the computer systems showed that the homeowner had fulfilled a
Trial Period Plan and was entitled to a permanent loan modification,
but was nevertheless declined for a permanent modification during a
blitz.” Employees were then instructed to make up a reason for the
denial to submit to the Treasury Department, which monitored the
program. Others say that bank employees falsified records in the
computer system and removed documents from homeowner files to make it
look like the borrower did not qualify for a permanent modification.
Senior managers provided carrots and
sticks for employees to lie to customers and push them into foreclosure.
Simone Gordon described meetings where managers created quotas for
lower-level employees, and a bonus system for reaching those quotas.
Employees “who placed ten or more accounts into foreclosure in a given
month received a $500 bonus,” Gordon wrote. “Bank of America also gave
employees gift cards to retail stores like Target or Bed Bath and Beyond
as rewards for placing accounts into foreclosure.” Employees were
closely monitored, and those who didn’t meet quotas, or who dared to
give borrowers accurate information, were fired, as was anyone who
“questioned the ethics … of declining loan modifications for false and
fraudulent reasons,” according to William Wilson.
Bank of America characterized the
affidavits as “rife with factual inaccuracies.” But they match
complaints from borrowers having to resubmit documents multiple times,
and getting denied for permanent modifications despite making all trial payments.
And these statements come from all over the country from ex-employees
without a relationship to one another. It did not result from one
“rogue” bank branch.
Simply put, Bank of America didn’t want
to hire enough staff to handle the crush of loan modification requests,
and used these delaying tactics as a shortcut. They also pushed people
into foreclosure to collect additional fees from them. And after
rejecting borrowers for HAMP modifications, they would offer an in-house
modification with a higher interest rate. This was all about profit
maximization. “We were regularly drilled that it was our job to maximize
fees for the Bank by fostering and extending delay of the HAMP
modification process by any means we could,” wrote Simone Gordon in her
affidavit.
It is a testament to the corruption of
the federal regulatory and law enforcement apparatus that we’re only
hearing evidence from inside Bank of America now, in a civil
class-action lawsuit from wronged homeowners, when the behavior was so
rampant for years. For example, the Treasury Department, charged with
specific oversight for HAMP, didn’t sanction a single bank for failing
to follow program guidelines for three years, and certainly did not
uncover any of this criminal conduct. Steven Cupples, a former
underwriter at Bank of America, explained in his statement how the bank
falsified records to Treasury to make it look like they granted more
modifications. But Treasury never investigated. Meanwhile, the Justice
Department joined with state Attorneys General and other federal
regulators to essentially bless this conduct in a series of weak settlements that incorporated other bank crimes as well, like “robo-signing” and submitting false documents to courts.
These affidavits, however, should return
law enforcement to the case. William Wilson, the case management
supervisor, alleges in his statement that this “ridiculous and immoral”
conduct continued through August of 2012, when he was eventually fired
for speaking up. That means Bank of America persisted with these
activities for at least six months AFTER the main, $25 billion settlement
to which they were a party. So state and federal regulators could sue
Bank of America over this new criminal conduct, which post-dates
the actions for which they released liability under the main settlement. Attorneys general in New York and Florida have accused Bank of America of violating the terms of the settlement, but they could simply open new cases about these new deceptive practices.
They would have no shortage of evidence,
in addition to the sworn affidavits. According to Theresa Terrelonge,
most loan-level representatives conducted their business through email;
in fact, various email communications have already been submitted under
seal in the Massachusetts civil case. State Attorneys General or US
Attorneys would have subpoena power to gather many more emails.
And they would have very specific
targets: the ex-employees listed specific executives by name who
authorized and directed the fraudulent process. “The delay and rejection
programs were methodically carried out under the overall direction of
Patrick Kerry, a Vice President who oversaw the entire eastern region’s
loan modification process,” wrote William Wilson. Other executives
mentioned by name include John Berens, Patricia Feltch and Rebecca
Mairone (now at JPMorgan Chase, and already named in a separate
financial fraud case). These are senior executives who, if this alleged
conduct is true, should face criminal liability.
Bank accountability activists have
already seized on the revelations. “This is not surprising, but
absolutely sickening,” said Peggy Mears, organizer for the Home
Defenders League. “Maybe finally our courts and elected officials will
stand with communities over Wall Street and prosecute, and then lock up,
these criminals.”
Sadly, it’s hard to raise hopes of that happening. Past experience shows that our top regulatory and law enforcement officials
are primarily interested in covering for Wall Street’s crimes. These
well-sourced allegations amount to an accusation of Bank of America
stealing thousands of homes, and lying to the government about it.
Homeowners who did everything asked of them were nevertheless pushed
into foreclosure, all to fortify profits on Wall Street. There’s a clear
path to punish Bank of America for this conduct. If it doesn’t result
in prosecutions, it will once again confirm the sorry excuse for justice
we have in America.
Source: salon
No comments:
Post a Comment