From Bad To Worse For Bank Of Countrywide Lynch: Utah AG Says BofA's State Foreclosures Are Illegal, As Elijah Cummings Demands BofA Subpoena
There were those who were fuming about what a great deal Bank of America got in acquiring Countrywide. Ironically, that same deal threatens to bite the banks in the ass and cost it tens of billions in litigation as more and more realize that the bank's mortgage-related practices (both before the CFC acquisition and after) have been based on a foundation of fraud. While Zero Hedge has not discussed the issue at length recently due to the expected temporary pushback by various legislatures, which would make an outright risk assessment against BofA impossible since there is far more politics than finance involved, it seems that with each passing day things are getting closer to spiralling out of control for America's largest lender. The latest news, just out from Bloomberg, indicating that the bank may be advised to urgently increase its litigation and putback reserve, is that Utah's AG Mark Shurtleff advised Brian Moynhian that the bank's foreclosures in Utah are illegal. "A Bank of America Corp. unit conducting home foreclosures in Utah is violating the law, the attorney general said in a letter as individual states advanced their investigations of mortgage servicing. “All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote." Oops. There goes another several billion in litigation fees because that beeping noise is thousands of foreclosed upon mortgageholders calling the first attorney they can find in the yellow pages in hopes (soon to be fulfilled) of unwinding completed foreclosures. This action joins comparable pushes from Connecticut, Illinois and California, and pretty soon BofA will be unable to foreclose upon any home in the domestic US. We estimate that the legal cost associated with foreclosure delays will cost the bank well over a billion when all is said and done. And just to make life truly miserable for BofA, Elijah Cumming sent a letter to the Committee on Oversight and Government Reform advising he is considering a broad subpoena to all mortgage servicers, chief among them, you guessed it: Bank of America.
ReconTrust Co. isn’t meeting requirements for carrying out foreclosures in the state, Utah Attorney General Mark Shurtleff said in a letter to Bank of America Chief Executive Officer Brian Moynihan. The letter, dated May 19, was released today by Shurtleff’s office.
“All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote.
Jumana Bauwens, a spokeswoman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a phone message and an e-mail seeking comment.
The move to crack down on ReconTrust comes as federal officials and attorneys general in all 50 states are scrutinizing how the largest mortgage servicers, including Bank of America, handle home loans and conduct foreclosures. New York Attorney General Eric Schneiderman is investigating banks’ mortgage securitizations, and California Attorney General Kamala Harris has announced a mortgage fraud task force.
Lender Processing Services Inc. (LPS) was subpoenaed by California and Illinois as part of an investigation of mortgage- servicing practices, according to statements today. Illinois also subpoenaed Nationwide Title Clearing Inc., according to an e-mailed statement from the office of Attorney General Lisa Madigan.
Bank of America's defense: it is exempt from the law.
In the appeals court case, Bank of America argued that ReconTrust has the authority to conduct foreclosures in Utah under the federal National Bank Act. The only laws that can limit the fiduciary activities of the company are the laws of the state where ReconTrust is located, it said. ReconTrust is based in California and its trust operations for Utah foreclosures take place in Texas, according to the court filing.
The Utah attorney general’s office “adamantly disagrees” with the position that as a national bank ReconTrust is exempt from following Utah law, Shurtleff said. ReconTrust must be a member of the state bar or a title insurance company, according to the attorney general.
Shurtleff told Moynihan that his office intends to enforce that law and asked for a response within 30 days.
Elsewhere, below is a copy of the letter sent out by Elijah Cumming to Darrell Issa:
May 24, 2011
The Honorable Darrell E. Issa
Committee on Oversight and Government Reform
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
I am writing to request that you issue six subpoenas to mortgage servicing companies that have refused to comply voluntarily with requests for documents relating to illegal foreclosures and inflated fees charged to homeowners—a key area of our Committee's oversight agenda.
Although four other mortgage servicing companies have provided the Committee with at least some information in response to document requests, these six companies have provided no documents despite efforts by staff to obtain their voluntary compliance.
On February 10, 2011, the Committee adopted an oversight plan for this Congress pursuant to House Rule X, Clause 2(d). At my request, the final oversight plan included a commitment to "examine the foreclosure crisis including wrongful foreclosures and other abuses by mortgage servicing companies."1 At the time, you commended my efforts and stated, " I believe we now have a plan that can be unanimously adopted."2
Two weeks later, after consultation with your staff, I sent letters to ten of the nation's largest mortgage servicing companies seeking documents relating to allegations of wrongful foreclosures against military service-members and their families, "robo-signing" of foreclosure documents filed with courts, inflated fees, fraud, and other deceptive practices. These letters requested the following documents for the time period from January 1, 2006, to the present:
(1) internal investigations and audits relating to foreclosure policies, procedures, or practices;
(2) documents relating to improperly executed foreclosures;
(3) documents relating to improper fees charged to homeowners;
(4) the total number of complaints alleging improperly executed foreclosures; and
(5) the total number of complaints alleging improper fees charged to homeowners.
Four of the mortgage servicing companies that received these letters have now begun responding to these requests. We are continuing to work with those companies to gather additional documents and information related to the Committee's investigation.
The remaining six mortgage servicing companies have failed to provide any of the requested documents. Five have written to explain their refusal, and one has failed to respond at all. The companies that have not provided documents are MetLife, Inc.; PHH Mortgage; SunTrust Banks, Inc.; U.S. Bank, N.A.; Wells Fargo & Company; and Bank of America Home Loans.4 Bank of America Home Loans has not submitted any response. One company, MetLife, Inc., explained that it would not provide the requested documents unless it was "subject to a subpoena."5
Our country is facing a foreclosure crisis that has affected six million homes since 2006, and there are currently 2.2 million homes now in foreclosure.6 As we heard during our Committee's first hearing on the foreclosure crisis on January 26, 2011, the performance of mortgage servicing companies has been "abysmal."7 Several of these same mortgage servicers have now admitted publicly that they wrongfully foreclosed on homeowners and charged improper fees.8
To fulfill the Committee's oversight agenda and investigate these allegations adequately, we must obtain responsive documents from these mortgage servicing companies. For these reasons, I request that you authorize and issue subpoenas to compel the production of these documents from MetLife, Inc.; PHH Mortgage; SunTrust Banks, Inc.; U.S. Bancorp; Wells Fargo & Company; and Bank of America Home Loans.
I appreciate your strong interest in these issues and look forward to working with you.
h/t Manal Mehta
- advertisements -