In the case of the U.S. District Court of Massachusetts regarding Bank of America Home Affordable Modification Program contract litigation, the sworn testimony of six former BofA employees, filed on June 8, reads like the outline of a shocking paperback novel. Worse, unfortunately from their perspective, it manifested itself in the reality of their workplace experience.
Having been on the “inside” and deeply involved with the top five servicers’ operations, challenges and best practices, I still find the testimony regarding incentives foreclosures versus modifications quite disturbing — but not surprising. It amounts to this: The withholding of foreclosure relief from deserving and qualified borrowers. The provision of incentives to employees initiating on higher numbers of distressed homeowners seeking relief. The meeting of foreclosure “quotas,” frustrating borrowers already in peril by delaying their HAMP process only to then approve them for a costlier in-house modification, or move them into foreclosure. And there have even been cases where those employees who did not make their foreclosure quotas were terminated.
The 29 separate complaints that comprise the suit against Bank of America were initially consolidated in November 2011 in the U.S. District Court of Massachusetts. In June 2013, the lead attorneys in the case, Klein Kavanagh Costello in Boston and Hagens Berman in Seattle, moved to have the case certified as a class action.
I’ve said it before and I’ll continue to say it: Until primary servicers are forced to revolutionize their processes after decades of underinvestment, and are truly held accountable for noncompliance, consumers will continue to be victimized. Even if the six former employees testifying under oath are all off base, one thing seems clear: where there’s smoke there is fire.
Rising property values and increasing demand will see foreclosure volumes rise once more. I have clients who have called, trying desperately to get help in order that they receive the assistance they need and are eligible to receive. I’ve seen the paperwork where some have been in their trial period for 24 months.
For others, it’s taking them a year — in some cases two years — to get to the final stages of a program that has a three-month trial period. The ones who are current on their mortgages are experiencing the inconsistencies of the voluntary nature afforded the servicers in their administration and execution of HAMP 2.0. Delays ensue. Rates and documents expire.
Just last week, one of my clients, who had been advised of her approval weeks prior, kept asking for her final commitment letter and closing date. All of her paperwork was in order. She was finally contacted by her lender, only to be advised that her rate had expired. But she was also advised that she could, however, continue to closing, though at a rate 50 basis points higher and with higher closing costs.
Having asked for an explanation, she still awaits a response. At the new rate, the cash flow savings vs. her current rate was miniscule and dressed up with the pleasure of paying higher closing costs. Why bother? She has a two-year paper trail documenting the excuses, the delays, the confusion and now this current scenario.
It is difficult to understand why the Federal Housing Finance Agency is not mandating the consistent and expedient use of Home Affordable Refinance Program for underwater performing borrowers on Fannie Mae and Freddie Mac loans, or HAMP for performing and delinquent borrowers. The complexities of mass modifications to borrowers who have been able to remain current despite the significant underwater status of their homes and the conundrum it beckons for the securities holders is easy enough to understand. But there is a responsible approach to ensure compliance.
Kicking the can down the road while values rise is an old and unfortunate tactic. Foreclosing remains a more costly venture than workout, especially with the incentives provided by the various programs. This is not to mention the standing revenue, or servicing fee income, received on the bulk of their portfolios that are performing.
It’s been five years and profits at the large banks and servicers — along with the GSEs — continue to rise. Consumers who lost their homes during the early foreclosure frenzy lost hundreds of billions of dollars in equity. In 2010, we calculated the figure to be around $198 billion of lost equity in minority communities alone.
Generational equity was being counted on by senior property owners in order to supplement their retirement income, only for them to subsequently become eligible to participate in the $25 billion settlement, which pales in comparison to that which was lost.
With all of the regulatory bodies now overseeing the industry, when will true and full accountability be required? Is this really who we are as a nation? Many might say: “No.” We must all keep watch.
