On Oct. 1 Bank of America said it would temporarily halt foreclosures in the 23 states where foreclosures require a court proceeding so that it might review the seizures in light of reports about industry-wide irregularities. (See my previous column, "Ask George Bailey.") The bank pledged to "amend all affidavits in foreclosure cases that have not yet gone to judgment."
Seventeen days later, the bank said it had completed its review in these 23 states and would resume foreclosures starting Oct. 25. (It will continue the review it began Oct. 8 of the remaining 27 states where foreclosures do not require a court proceeding—and where the likelihood that anyone will care about fake notarizations, missing documents, and the like is therefore more remote.) In effect, the bank said on Oct. 18 that it had reviewed 102,000 foreclosures, figured out whatever may have been wrong with them, and was ready to get back to the business of seizing and selling off these delinquent properties.
The foreclosure crisis was brought on by bluffing and corner-cutting banks (or foreclosure mills subcontracting for those banks) that had too many defaults to process at once. Might a similar bluffing and corner-cutting be the hallmark of Bank of America's Evelyn Wood-style review? One can't be certain, but three clues suggest the answer is "yes."
1) Bank of America won't explain exactly what it did. I phoned the bank's press office and asked how the 102,000 pending foreclosures * were checked out. I didn't expect fine-grained detail, but I figured at least the bank would have prepared a fact sheet for the many, many reporters likely to ask this question. Instead, I was told that somebody would return my call. No one did. I decided not to take this personally after Googling "Bank of America" and "foreclosure": As best I can tell, no news outlet has gotten Bank of America to elaborate on its terse announcement.
2) Housing advocates smell a rat. Surely, I thought, one of the many people working this issue from the consumer side can tell me what Bank of America's process was. None could. The typical response, when I asked whether the type of review necessary was possible in the span of 17 days, was: No way.
A rough consensus among these consumer advocates was that the bank had likely looked at its computer entries for all 102,000 foreclosures to see whether, based solely on the data input, there were any obvious irregularities. "Someone is sitting in front of a screen and they pull up what's in there and they say yes, that's what's in there," explained one housing advocate. "That can be done quickly. What can't be done quickly is looking through all the accounting and making sure that it's right. That an error wasn't made, that a payment wasn't misapplied."
I personally became acquainted with the latter possibility seven or eight years ago when a friend alerted my wife that the house we then lived in, in the Washington neighborhood of Takoma Park, was on a list of homes to be put up for auction. The culprit in that instance wasn't our bank, but the District of Columbia government, which had put our real estate tax payments into the wrong account and then concluded we weren't paying any. I have no trouble believing an overworked bank employee could make a similar blunder. Indeed, in one particularly outrageous instance Bank of America foreclosed on a Florida man who didn't even have a mortgage—he bought his house with cash.
The feverish securitization of mortgages during the past decade led, in many instances, to banks transferring ownership of a loan without acquiring the documents necessary to establish that ownership. On AOL's Daily Finance Web site, Abigail Field asks, "Does B of A's claim that there were 'no problems' in its foreclosures mean that it checked each securitized mortgage it's foreclosing on and found that in every case the securitization was done properly, and no title problems exist in any of them?" Probably not, she concludes.
One housing advocate told me that Bank of America probably looked to see whether every mortgage had been evaluated for possible modification, as required by law. A problem with so-called robo-signers, the data-input staff who speed foreclosures along, is that the foreclosure can end up going through even if the mortgage holder is already in the process of negotiating a modification under the federal Housing Affordable Modification Program. After I noted this fact in an earlier column, a Treasury spokesperson contacted me to say that I was incorrect. I have since been assured by multiple sources that it happens all the time. On Oct. 21 NPR cited the case of Nicole dePuy in Fort Myers, Fla., who couldn't meet her mortgage payments after her county-government employer cut her pay. Her bank renegotiated her loan, she started making the payments, and the bank foreclosed on her anyway (apparently it forgot to inform the court of the loan modification) and sold the house to someone else. When dePuy tried to appeal, the judge ruled against her. The bank was Bank of America.
Timothy Lilienthal, bank accountability campaign director for the People Improving Communities through Organizing National Network, a faith-based activist group, has over the last year and a half had many meetings with Bank of America officials in which he's urged the company to pursue more loan modifications. "Every single one of those meetings—and it didn't matter whether we were sitting in a local branch or in Charlotte at [the bank's] headquarters—every single one of those meetings we heard the same set of talking points," he told me. The bank's attitude, he said, was "Let's just create all types of good PR. … They didn't even friggin' take notes." He strongly suspects the bank's brief foreclosure moratorium was largely a PR move.
The Bank of America's own language describing what it has done does little to dispel such suspicions. "We have reviewed our process for resubmission of foreclosure affidavits," it says, "with key stakeholders, including our largest investors." Investors? The bank is silent about whether it has been in touch with the people being foreclosed on. I take that to mean it hasn't.
3) The Obama administration has signaled it won't get tough with banks.On Oct. 1, when Bank of America imposed its moratorium, many people were calling on President Obama to impose a mandatory foreclosure moratorium on all banks. It therefore made sense for the bank to demonstrate that it was being notably conscientious.
It soon became apparent, however, that the White House had no desire to intervene, given the uncertain economic consequences and (especially) the imminence of the midterm elections. You've heard of the Tea Party, right? It supposedly began with Rick Santelli's ugly CNBC rant from a Chicago trading floor that the economic stimulus bill would "subsidize the losers' mortgages." I'll bet White House senior adviser David Axelrod remembers that.
Call me a cynic. But I think this evidence of the administration's disinclination to act is the most significant new information Bank of America acquired during its 17-day moratorium. Let's hope I'm wrong.
Correction, Oct. 25, 2010: An earlier version of this column made erroneous reference to 102,000 "pending mortgages." The mortgages weren't pending; the foreclosures were. (Return to the corrected sentence.)