Archive for the ‘Bankruptcy and Foreclosures’ Category

Feds: BofA Was "Hustling" the Mortgage Industry

Monday, October 29th, 2012

The federal government has filed a $1 billion civil lawsuit against Bank of America and its subsidiaries, claiming the company intended to remove specific quality controls with regard to loan origination – which played a huge part in the meltdown of the housing market. dollarsign1.jpg

know it’s no secret that lenders and banks were central to the creation and subsequent implosion of the housing bubble. What the filing in U.S. v. Bank of America, U.S. District Court, Southern District of New York, shows is some insight into just how elaborate and planned these schemes were.

Specifically, federal prosecutors are targeting the actions and processes of subsidiary Countrywide. Acting as a mortgage lender, the suit says the company put in place a loan orgination process that company insiders called “The Hustle.” According to the government, it started in 2007. The primary – and deliberate – goal was to remove the quality controls, or checks and balances, that stood in the way of the company churning out as many mortgages as possible. In order to accomplish this, Countrywide launched a program called Full Spectrum Lending.

The problem with this, of course as we now know, is that this process meant people who could never have actually afforded these loans were approved. But it wasn’t just the average Joe the banks were scamming. The government had been there to ensure those loans, as they had done for decades following the Great Depression. The government contends it was not aware that the loans, which had been approved according to what were supposed to be stringent measures, were actually high-risk liabilities. When the bottom fell out of the market, the federal housing agency was stuck holding a large portion of that tab.

Although the specific “hustle” scheme was started by Countrywide, which was independent in 2007, the Department of Justice claims that Bank of America, which acquired the company in 2009, continued the process, despite warnings by one top

executive that it wouldn’t end well.

In fact, the former executive vice president of Countrywide, also a senior manager of the Countrywide division that kickstarted the “hustle” program, blew the whistle on the practice, saying he had pleaded with his fellow executives to drop the program. In fact, he was actually party to the original qui tam complaint (which means he filed it against his former employer, in conjunction with the government, and will now be in line for millions as a whistleblower).

At one time, Countrywide was the largest mortgage lender in the country, cranking out some $490 billion in mortgage loans in 2005. Subprime loans specifically were originated out of its Full Spectrum Lending division. The “hustle” was a number of steps taken to reduce processing time as well as underwriting oversight of conventional loans. They called these controls “toll gates,” viewed as obstacles to overcome. To help overcome this, the company eliminated checklists that had previously been mandatory and did away with all of its compliance specialists, who previously had been the ones who conducted quality control on each individual loan to make sure it met the proper criteria.

All of this begins to paint a picture of a very deliberate plot to defraud both taxpayers and consumers.

The government alleges the company specifically has violated the recently revamped federal False Claims Act.

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South Florida Homeowners Beware: Banks Now Faking Debt Forgiveness

Monday, October 1st, 2012

Having caused the implosion of the real estate market and the worst recessions since the Great Depression, banks have done everything possible — by legal means and by those illegal — to avoid working with homeowners. Especially if it meant debt forgiveness.

And why not? It’s not as if the government has held them criminally responsible for anything. As our continue to report, underwater homeowners in South Florida need to get proactive in seeking the advice of experienced legal counsel. 455596_software_development_centre.jpg

Now it appears, having agreed to a $25 billion settlement with the federal government that induces them to work with troubled borrowers, banks have been forgiving debt in droves.

It’s just that the debts do not exist.

consumers across the nation are getting letters from some of the nation’s largest banks — forgiving debt they don’t owe.

In Connecticut, $64,000 that a homeowner had eliminated through a bankruptcy filing three years ago. Here in Florida, $190,000 that a resident no longer owed. In Virginia, Bank of America wiped out a $231,000 home equity loan a consumer had discharged last May.

Banks very well

may be attempting to satisfy the terms of their agreement with the government by eliminating debts they have no legal right to collect in the first place. A bankruptcy attorney reported several of his clients have received such letters.

Aside from the in-your-face taunting of the government by banks many thought got a sweetheart settlement deal to begin with, consumer advocates point to the possible tax nightmare that could result. The Internal Revenue Service considers forgiven debt income — the exception is when such debt is discharged through bankruptcy. By claiming to forgive debt a consumer has discharged, banks could be setting struggling consumers up for undue consequences.

The letters even warn the information will be reported to the IRS — borrowers will have to prove the banks erred in claiming to have forgiven the debt.

This is just another example of bank action putting consumers at peril — months or even years after they thought a matter had been settled. Please don’t attempt to deal with these companies on your own — consulting experienced legal counsel will be well worth the cost and the peace of mind.

For their part, banks contend the letters were meant to notify borrowers of the release of liens in connection with the forgiveness of debt through bankruptcy. Bank of America estimates it sent out 12,000 of the letters. Perhaps we shouldn’t blame consumers if they are confused — since nowhere in the letter does it discuss liens.

And don’t rush to lay down your key points at the first opportunity