Hackers just released a bunch of e-mails purporting to show fraud at Bank of America. But who needs them?
For months, Anonymous, an online hacker group, has bragged that it holds a treasure trove of e-mail messages that would shame and embarrass Bank of America. At midnight on Sunday, it let them fly. The venue, appropriately enough, was BankofAmericaSuck.com, and the Twitter tag "#blackmonday." The leaker is an aggrieved seven-year veteran of a former Bank of America subsidiary, Balboa Insurance. The e-mails show "corruption and fraud," Anonymous says, with Bank of America employees deleting documentation information, apparently to help the bank foreclose.
Forgive me if I suppress a yawn. First, there are many very well-documented stories about mortgage fraud and illegal foreclosures already out there. Second, and more relevant, the information revealed by Anonymous doesn't really prove anything.
Of course, nobody has independently verified the documents, and Bank of America has denied the allegations, telling Reuters that the e-mails come from a disgruntled former employee and show clerical errors, not fraud. The bank also says the e-mails do not pertain to foreclosure. "We are confident that his extravagant assertions are untrue," a spokesperson said.
As often happens in reporting on the Kafkaesque world of mortgage finance, much effort needs to go into explaining the paperwork. "Many of you do not know who Balboa Insurance Group is," the leaker writes on the site, "but if you've ever had a loan for an automobile, farm equipment, mobile home, or residential or commercial property, we knew you. In fact, we probably charged you … for insurance you didn't even need." That insurance is called "force-placed insurance," and it is perfectly legal (though attorneys general are getting close to restricting banks and servicers from profiting on it). Servicers, working on the lending bank's behalf, take out the policies. The homeowner then pays the servicer for the premiums—premiums that generally run well above market rates.
The corruption and fraud comes in, apparently, during the processing. An e-mail message includes a list of document tracking numbers pertaining to GMAC home loans with a request for "image removal." The e-mails are vague on why Balboa wants the tracking numbers removed, though it is clear Balboa employees knew better than to do it—one complains about raising a red flag for auditors. There are other juicy bits left out as well. The leaker writes that someone "tells me Boa [Bank of America] is knowingly hiding Foreclosure information from Feds," but says no more. (He also says the bank encouraged employees to date one another, apparently part of a cultish office culture.)
Even if you're inclined to believe that this is evidence of fraud, the removal of documentation numbers and imposition of overpriced insurance policies seem like small potatoes. The public has heard about massive mortgage fraud scandals for years now: The Federal Bureau of Investigation started warning of an "epidemic" in 2004. If anything, the Anonymous cache is a useful reminder that during both bubble and bust, the U.S. mortgage finance system was a veritable jungle of rotten products, bunk loans, false documents, and shady practices—and that things haven't improved all that much lately.
Of course, banks famously ignored or encouraged mortgage fraud while the housing bubble was inflating. There was, for instance, "rampant" fraud in the subprime loan business. And though plenty of Americans lied to get houses they could not really afford, the government estimates lenders perpetrated about 80 percent of the fraud. It is old news—as is the fraud in constructing and selling dodgy mortgage-backed securities comprised of all of those dodgy loans.
But the burst of the housing bubble failed to stamp out the bad behavior. Banks and servicers suddenly confronted a flood of homes going into the foreclosure process, and often resorted to shoddy practices to get through the backlog. You've probably heard the stories. Last year, Bank of America foreclosed on a home owned by a family that never missed a payment. A JPMorgan contractor broke into a home to change the locks as a terrified woman cowered in her bathroom. Bank of America also apparently foreclosed on a home even though it did not service or own the mortgage.
Those might be isolated incidents, but there's ample evidence of systemic problems as well. Take another current complaint against Bank of America, that its loan-modification program—designed to help people stay in their houses—failed to help customers. Awaiting a modification, customers made "mortgage payments they could not afford, running through their savings, their retirement funds, or their children's education funds," reads a December 2010 complaint from the Nevada attorney general. "Additionally, due to Bank of America's misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes."
The complaint is part of a massive mortgage scandal sitting there in broad daylight, often known by the moniker "foreclosure fraud." Last year, publications like Mother Jones started reporting that banks or lawyers working for them were churning through a dizzying number of documents necessary to legally foreclose. They were falsifying signatures. They were backdating papers. The problems seemed so pervasive that all 50 state attorneys general joined forces to investigate and then negotiate with the banks, halting foreclosures in many states in the meantime. A preliminary settlement on the scandal was just released this month.
Annie Lowrey, formerly Slate’s Moneybox columnist, is economic policy reporter for the New York Times.
Photograph of home insurance documents by Mario Tama/Getty Images.