You were right: no institution could lose that much paper.
Otherwise, there would be a paper dump outside each branch bank.
Bank loan modification staffs were instructed to lie about whether they had the borrower’s application and rewarded for pushing homes into foreclosure.
What we suspected all along was confirmed under oath in a New York action against Bank of America this month.
Simone Gordon, a 5 year employee of Bank of America in its Loss Mitigation department, offered a sworn affidavit detailing management instructions to delay and deny loan modifications:
We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had). We were told that admitting that the Bank received documents would “open a can of worms” since the Bank was required to underwrite the loan modification within 30 days of receiving those documents, and it did not have sufficient underwriting staff to complete the underwriting in that time.
You can see the full affidavit here. Naked Capitalism, among others, talks further to whistleblowers in the banks.
You had to know that no bureaucracy could honestly lose so much paper and be so clueless.
No, it wasn’t honest and they had to work at frustrating loan modifications.
Overseeing the servicers
The lack of consequences for bad behavior by the banks has been one of the enduring frustrations of programs like HAMP . Well meaning programs which promised to at least put a band aid on the wounds of the mortgage mess are not implemented honestly the the banks.
Fox, meet the chickens.
If you are a homeowner in need of a loan modification and get this run around, what do you do?
There are some overseeing these programs with consumer assistance functions: CFPB. the California Mortgage Settlement Monitor, the Comptroller of the Currency, your representatives in Congress.
Courts have begun to offer redress to homeowners who are treated unfairly by mortgage servicers a forum in court.
How about a federal bankruptcy judge as an enforcer of the obligations of mortgage servicers? That’s working well in Chapter 13 cases in the Bay Area of California.
Published guidelines allow homeowners to propose Chapter 13 plans that contemplate a loan modification. The automatic stay will remain in effect so long as the lender has the modification under consideration.
In order to go to foreclosure, or otherwise get more of an upper hand with borrowers, the servicer has to appear before the judge. Mortgage mill lawyers find it harder to sell the “dog ate your homework” line to a judge.
It’s certainly not perfect. The bankruptcy courts in the Bay Area take the position they can’t force a loan modification. They can control whether a dilatory or dishonest mortgage servicer gets relief from the stay to proceed to foreclosure.
But without a referee, mortgage modification in the hands of the banks is just a street brawl, rather than a boxing match.
Image courtesy of Ashley Felton and Wikimedia.