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Bank of America Proposes To Cut Outstanding Mortgages In Exchange For Broad Legal Settlement Deal

Tyler Durden's picture


As had been rumored over the past few weeks, the WSJ reports that Bank of America is actively pursuing a deal in which it would get "broad release" from legal claims against the lender (which if provisioned properly and in their full amount will destroy the bank) in exchange for cutting the amounts owed by borrowers. The bank is "discussing the proposal with state and federal officials who are prodding the country's biggest banks toward a multibillion-dollar deal to atone for foreclosure errors…As the discussions dragged on past the mid-June target set by U.S. officials, Bank of America began pressing officials for a speedy resolution, and it put forward its principal reduction proposal in one-on-one talks with state and federal officials. Meanwhile, negotiations continue with the banks as a group…Bank of America has told officials it wants protection against future litigation relating to mortgage servicing, said people familiar with the situation. In exchange it is willing to agree to a program in which troubled borrowers would have to prove financial distress to qualify for a writedown of the principal owed on their mortgage…The principal amount would have to be $1 million or less in certain geographic areas, one of these people said, and a reduction would apply to the bank's own mortgages and those its services for private investors…The more modifications the bank agrees to, the less it will pay in cash as part of an eventual settlement, one of these people said." So in summary, in order to protect itself from being destroyed in the courts, Bank of America is happy to spread the Bernanke Put love on all of its deadbeat clients, in the process further exacerbating the class warfare that is emerging to be the most successful legacy of the Obama administration.

And in other completely irrelevant news, the MBA reported a 7.8% jump in its refi index. This utterly worthless weekly series , tends to fluctuate by up or down 10% each week, but most importantly is down 30% compared to a year earlier as virtually nobody pursues refinancings even in this environment of record low interest rates. As Bloomberg analysts Chris Maloney says, "Refi data continues to be supportive of MBS, shows homeowners, especially those whose mortgages were packaged into cuspy coupons, are either unwilling or unable to refi. He adds: "Stubborn unemployment rate, falling home prices, “shadow” inventory, underwater homeowners among headwinds that may hold refis below last year’s levels through summer."

And why should anyone refi if i) nobody is paying their mortgage and ii) everyone knows their lender bank will soon follow in BAC's footsteps and cur their principal outright on the existing mortgage? Why indeed.

h/t Manal


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Wed, 08/03/2011 - 07:39 | 1519891 oobrien
oobrien's picture

what happened to Julian Assange?

Wasn't he supposed to release the poison pill against BOA?

Oh, well.  Shit happens.

Wed, 08/03/2011 - 09:45 | 1520240 TrafficNotHere
TrafficNotHere's picture

Yeh, I was waiting for that.

Wed, 08/03/2011 - 10:46 | 1520549 FEDbuster
FEDbuster's picture

Fuck BofA!

Hasten the Collapse, OBAMA 2012

Wed, 08/03/2011 - 17:27 | 1522076 mkkby
mkkby's picture

Let me get this straight... B of A has already lost a bundle (mortgages are under water and borrowers defaulting).  They want to be shielded from massive fraud liability and have their legal losses reduced, for what?   In exchange FOR MERELY RECOGNIZING those losses.

If they foreclose, they will lose much more than the principal write downs.  So in effect, they expect TO BE PAID to do what's in their own best interest.  And be forgiven for intentional fraud.

That is some chutzpa.  I expect the gov to accept this and go live with what a great deal it is for taxpayers and consumers.  Score a little extra to the campaign kitty for Obama and the top dems and repubs.

Wed, 08/03/2011 - 07:40 | 1519892 KyLafoon
KyLafoon's picture

We all laughed at Peggy Joseph when she said at an Obama campaign rally "Obama gonna pay my mortgage". Whose laughing now?


Wed, 08/03/2011 - 07:50 | 1519917 wang (not verified)
wang's picture

indeed, who would have guessed that her predictive abilities would rival those of  John Paulson

Peggy from 2008

Wed, 08/03/2011 - 07:59 | 1519940 EvlTheCat
EvlTheCat's picture

love the avatar wang

Wed, 08/03/2011 - 08:44 | 1520065 Cvillian
Cvillian's picture

Looks like I need to prepare for a principal reduction by halting payment on my mortgage. 

So, the net statement being made is who cares about the people that pay their mortgage (even though they're underwater too because their neighbors walked away from their home), this "program" will only be for those people unable to afford their home in the first place?

I don't want a bail out (I bought at the wrong time and accept it), and I absolutely don't think it's fair for irresponsible people to get a principal reduction. 

I received a package in the mail yesterday from Chase (a full 4 months after requesting info on my loan) and they had the gaul to mention that they may pursue litigation for claims I made in my one page template letter where I essentially said, "prove to me you are, or service for, the rightful owner of my mortgage".


Wed, 08/03/2011 - 10:14 | 1520391 MachoMan
MachoMan's picture

Did they cite a clause in your note or mortgage that would allow them to pursue a claim?  Seems not only implausible, but pretty desperate.  [and totally different from the issue of whether you legally can dispute their status after having made payments to them]

Wed, 08/03/2011 - 17:32 | 1522090 mkkby
mkkby's picture

If you have any savings convert it to gold and silver. Then stop paying or declare bankruptcy.  You'll have your gold hidden.  They can sue all they want and get nada.

Wed, 08/03/2011 - 10:23 | 1520432 CrashisOptimistic
CrashisOptimistic's picture

Let me be sure I understand this.

If you paid off your mortgage, the way you're supposed to, you'll get a refund?  Yes?

Wed, 08/03/2011 - 07:41 | 1519896 nedwardkelly
nedwardkelly's picture

The best part is that they're also going to give out free cash to anyone that stayed ahead, or paid off their mortgage. They've decided it really is a good idea to reward those that lived below their means and were fiscally prudent.


...oh wait...

Wed, 08/03/2011 - 10:11 | 1520376 TaxSlave
TaxSlave's picture

Uhh .... and for those who already lost their homes ....

When class warfare erupts into physical altercations, it is very likely to be a dispossessed middle class showing up en masse at foreclosure mills like Trott & Trott.  Anyone who has ever had dealings with them in any capacity will know exactly what I mean.

Wed, 08/03/2011 - 07:42 | 1519899 wombats
wombats's picture

Transitory moral hazard?

Wed, 08/03/2011 - 07:42 | 1519901 oobrien
oobrien's picture

Wait till they start bulldozing the foreclosed houses in order to maintain prices.

According to TIME Magazine, that's just right around the corner.

Wed, 08/03/2011 - 07:48 | 1519911 Translational Lift
Translational Lift's picture

Look for Stalinesque mega apartment buildings to come to a location near you anytime now....

Wed, 08/03/2011 - 08:22 | 1519995 firstdivision
firstdivision's picture

They already have started that, and BoA is leading the charge

Wed, 08/03/2011 - 10:36 | 1520496 FEDbuster
FEDbuster's picture

Tearing down new homes by banksters is old news:

Hasten the Collapse, OBAMA 2012

Wed, 08/03/2011 - 07:49 | 1519913 Freewheelin Franklin
Freewheelin Franklin's picture

Is BoA offering principle reduction to anybody who "qualifies", or just the people they screwed over with foreclosure errors? The way I read it is that they are willing to refi any deadbeat on the block in order to avoid paying the people who have actually been harmed. I must be reading this wrong. Somebody tell me I'm reading this wrong.

Wed, 08/03/2011 - 08:14 | 1519984 goldfish1
goldfish1's picture

Free money for the plebes:

Friday, June 3, 2011 The State of Ohio has resources to help families struggling to make their mortgage payments after experiencing a job loss or reduction in income. As a result of a federal initiative to provide financial assistance to families in states hardest hit by the national foreclosure crisis, Ohio received $570 million to help homeowners stay in their homes. These funds are distributed through Restoring Stability: A Save the Dream Ohio Initiative.

Four programs are available:

  • Rescue Payment Assistance
  • Partial Mortgage Payment Assistance
  • Modification Assistance with Principal Reduction
  • Transition Assistance

To learn more or to apply for assistance, visit or call 888-404-4674.

Wed, 08/03/2011 - 08:20 | 1520005 Freewheelin Franklin
Freewheelin Franklin's picture

Thanks but, that really didn't answer my question.

Wed, 08/03/2011 - 09:21 | 1520146 gmrpeabody
gmrpeabody's picture

Refer to the sentence that starts with... To learn more.

Wed, 08/03/2011 - 07:52 | 1519919 mayhem_korner
mayhem_korner's picture

Great scheme.  Wean the overextended off crystal meth by offering heroin lollipos. 

Wed, 08/03/2011 - 07:52 | 1519920 belogical
belogical's picture

Great deal for BofA, their gonna lose that money anyway and this halts additional cost as people sue

Wed, 08/03/2011 - 07:52 | 1519921 Version 7
Version 7's picture

At some point the government will have to take over the banks and the debt written off. And they will beg for it.

Wed, 08/03/2011 - 07:53 | 1519923 Watson
Watson's picture

Surely any such agreement only binds against state/federal claims.
So any private individual with a loan from BAC, but where BAC/assignees have not done the paperwork properly, still has a chance of persuading the Court that the liability is unenforceable?

Wed, 08/03/2011 - 08:15 | 1519991 goldfish1
goldfish1's picture

Sure. Until they change the law.

Wed, 08/03/2011 - 08:22 | 1520010 Rusty_Shackleford
Rusty_Shackleford's picture

Sure,... in a country with the rule of law.

In the US,.... not so much.

Wed, 08/03/2011 - 07:54 | 1519926 gwar5
gwar5's picture



Class warfare is the tried and true way to get out the vote.  But, I guess I'd rather have deadbeat individuals get something out of this than have a deadbeat government take a settlement from the banks as a class action. At least something would get into the economy.

Would this be happening without an election coming up? There's a campaign slogan in there somewhere: "Stay (in your house) with Obama!"

"Marxism never sleeps.... ... that's why I have a great big dog."  -- unknown.


Wed, 08/03/2011 - 07:56 | 1519931 DavidC
DavidC's picture

Anyone approached by any bank to dicuss a loan modification should just ask for the original paperwork...


Wed, 08/03/2011 - 09:16 | 1520131 pods
pods's picture

My servicer kept contacting me about a refi into a fixed rate loan. I told them I was perfectly happy with my ARM (currently 2.5%).  A few months later I find out that they just registered my note with the county, only 4 years after they bought it.  They wanted to make the fees on a new loan instead of fixing mine.

Lotsa shakey stuff here, big servicers are merely playing a game of CYA.


Wed, 08/03/2011 - 17:36 | 1522101 mkkby
mkkby's picture

Yep.  If you are offered a mod, assume it's a trick to cure errors or fraud.

Wed, 08/03/2011 - 07:57 | 1519932 Version 7
Version 7's picture

If just people were so effective not paying their income tax as they are in not paying their mortgages without knowing it.

Wed, 08/03/2011 - 08:01 | 1519947 New American Re...
New American Revolution's picture

Ah yes, is that what we call a 'bribe'?    I'll pay this if you'll let me go?     I promise I won't do it again.      To hell with the American Justice System, let's do something else this time,...ok?    Huh, huh, ok,ok?

Wed, 08/03/2011 - 08:03 | 1519953 blackvegetable
blackvegetable's picture

Radical notion, I know....but didn't these "foreclosure error" legal actions rise from the STATE level as opposed to from the bowels of the Obama Justice Dept.?

Wed, 08/03/2011 - 08:07 | 1519968 Catullus
Catullus's picture

You can't sue me.  I paid off the cops.  Apply through our writedown department.

Wed, 08/03/2011 - 08:15 | 1519992 firstdivision
firstdivision's picture

This is bullish for crApple

Wed, 08/03/2011 - 08:20 | 1520004 sunnydays
sunnydays's picture

They are pressing for a resolution because many more people have woken up to their fraud and standing up against the foreclosure fraud.  People are taking them to court all around the country and some states put a mortorium on their fraud foreclosures.  So this is about the government really protecting them against the people who are winning.

What will the govt do?  Say no one can take them to court for fraud anymore?  They will sanctify the fraud?

It is always about protecting the banks not the people.

Wed, 08/03/2011 - 08:23 | 1520015 NumberNone
NumberNone's picture

We've seen this dance before.  BofA gets their legal release and somehow the millions of mortgages that are supposed to get 'addressed' somehow get fucked up, delayed, or actually wind up costing the home-debtor more.  "Sure Mr. HomeDebtor we will cut your principle...all you need to do is sign this 40 year note at 10% interest and that we'll lop that $10K in principle right off there."

Wed, 08/03/2011 - 08:30 | 1520027 Agent 440
Agent 440's picture

So "Friends of Angelo" has a sequel now?

Wed, 08/03/2011 - 08:35 | 1520045 -Michelle-
-Michelle-'s picture

I wonder about this.  Over the last month or so, we've gotten a few notices from BoA along the lines of "thank you for your information request. We are gathering the necessary paperwork to answer your question..."  Only thing is we didn't make any requests.  I called their CS to see what was going on and the rep said we'd been "targeted" for some kind of modification deal and would be receiving information soon.

We're current on our mortgage, although heavily underwater (thanks, Florida).  I wonder if those letters have anything to do with this.

Wed, 08/03/2011 - 09:03 | 1520089 Cvillian
Cvillian's picture

I received something from Chase yesterday. Back in April 2011, I sent a "where's the note" letter to the bank. I have never missed or been late on a payment in the six years I have had a mortgage on my underwater condo.

At the end of the letter were the following few hilarious paragraphs:

Enclosed with your correspondence were documents that reference your loan with Chase. Please note that these documents are invalid and are not recognized by JPMorgan Chase Bank, NA, Chase Home Finance LL, or any entity that may have an interest in the subject loan and property. We intend to take prompt action to see that any entity or individual with whom you may have filed these documents is notified of their invalidity. We are currently investigating the documents and determining the appropriate course of action, which may include initiating legal proceedings and/or reporting the situation to the appropriate government agency or law enforcement authorities. 

You should know that borrowers have fallen victim to unlawful scams that include documents similar to the ones you sent to Chase. We are aware of advertising and other solicitations for borrowers to lodge such documents with their lender. The solicitations claim that the filing of such documents will extinguish valid and legal debt obligations. Those efforts are invalid, do not eliminate debt, and may be illegal. We strongly advise that you consult an attorney or local law enforcement regarding your efforts to avoid your obligation, as well as the repercussions of the efforts you have taken so far.

Chase is obligated to report accurate information to the credit bureaus and will continue to do so. Late payments, missed payments, or other defaults on the account may be reflected in your credit report.

Wed, 08/03/2011 - 09:24 | 1520160 pods
pods's picture

They're scared.  Make sure you have all your paperwork and have it looked over.  Know the law.

And Michelle, they are contacting you because your note is impaired.  Same thing they did to me.  All was good too.  Got a couple of "We wanted to get you into a fixed rate loan since interest rates are so low."  I told them thanks but no thanks.

Month later they registered my note, only 4 years late.  If they settle the old note with the new, it will be up to snuff and will be rock solid and watertight.  Don't do it.  Why help them out?


Wed, 08/03/2011 - 10:33 | 1520480 MachoMan
MachoMan's picture

That's a hilarious response to a "where's my note" query...  Did you send them documents that purported to relieve you of your note or mortgage obligations?  If so, what was the substance/argument of such documents?  Strange...

Also, Pods, that's crazy!  They've actually recorded a down stream assignment (what is "registered'?)?  How is that even possible given it is effectively a "wild" deed/assignment...  since any intermediary assignees/assignors have not recorded any documentation...  and it would be odd for the caboose to have the documents of assignment from each upstream assignor.  If title searchers look for that, they'll take a big shit on it...  and I would think it would need many affidavits to be recorded along with it...  depending on the number of intermediary assignees.

Or was this a local bank (ARM) that was just finally getting around to recording?  (which is hilariously sloppy if so).

Wed, 08/03/2011 - 11:21 | 1520760 Cvillian
Cvillian's picture

Nope. Nothing but the template, "Where's the note?" that you can find online in a number of places. I think the SEIU or some group like that put it together.

There was nothing official showing who held the note, only a statement from letter dated July 26th, 2011 saying that I should go to the county courthouse to see about assignment of the instrument. 

They also mentioned in this same document dated July 26, 2011, under the "servicing related questions" field, "The investor for this loan is Fannie Mae, 3150 Worldgate Drive, Herndon, VA 20170. Some of this information requested under this section is either proprietary or unavailable, and will not be provided."

Wed, 08/03/2011 - 08:55 | 1520084 snowball777
snowball777's picture

Dear Bank of Lynching America CountryWide,

Fuck you. You broke it, you bought it. Have fun bulldozing it.

You can't shake the Devil's hand and say you were only kidding.


Wed, 08/03/2011 - 09:10 | 1520110 Atlantis Consigliore
Atlantis Consigliore's picture

15% of it is non performing, foreclosed or NOD past 90 + days, on their $2 Trillion liable GSE mortgages....thats 2 million homes, even if you made a deal short pay, cut bal, you have 2 million renters with BAD credit, unrefinanceable. Better they throw in the jingle mail and add 2 million bulldozers..

2 Million bulldozers jobs.  hey.....SCHTIMULUS!!!    lol.



Wed, 08/03/2011 - 09:23 | 1520135 G-R-U-N-T
G-R-U-N-T's picture

"The bank is "discussing the proposal with state and federal officials who are prodding the country's biggest banks toward a multibillion-dollar deal to atone for foreclosure errors…"

So much for the rule of law....

"When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed."

-Ayn Rand

How is it possible to atone for colluding forces (Government and Banks) whom are both responsible for deceiving, through fraud, good honest healthy producing tax payers? What are they going to give back the fees and bonuses they deceived much of the populace out of?

Fine the banks so that government can continue the redistribution plan by continuing to steal what they have already stolen. Geesh!!

Absurdity = Criminals negotiating and deciding their own fate in front of an ignorant populace.



Wed, 08/03/2011 - 10:20 | 1520419 TaxSlave
TaxSlave's picture

Absurdity = Criminals negotiating and deciding their own fate in front of an ignorant populace.

Absurdity?  You are too charitable.  Perversion is more like it.

Wed, 08/03/2011 - 10:00 | 1520305 KowPie
KowPie's picture

JP Muttinhead held my note. When I requested payoff info (in early 2009) it took me 8 months from start to finish to complete the process. I had cash in hand to rid myself of those parasites. 8 fucking months! I finally completed the process and had a letter of satisfaction in hand in mid NOV 2009 and got it recorded in my local county seat by the end of the month.

Those shitbags did everything possible to delay the process and generally fuck with me over paying off the note. I never missed a payment in 8 years. I was never late in 8 years. 95% of the time I was 2 months ahead of schedule to provide myself float time should I run into unforseen financial problems.

Based on my experience I will NEVER again finance ANYTHING through a bank for the rest of my life. They are all criminal, thieving, cheating, dishonest bastards. I will dance a jig and piss on their collective graves when it all comes down.

Wed, 08/03/2011 - 10:00 | 1520309 curbyourrisk
curbyourrisk's picture

Based onw hat BAC is willing to do I will once again put forth my recommendation made in 2009. 



Wed, 08/03/2011 - 10:59 | 1520620 Troll Magnet
Troll Magnet's picture

claw back? what do you mean by that? and you can reassign what you've already paid? please elaborate.

Wed, 08/03/2011 - 11:30 | 1520799 SilverRhino
SilverRhino's picture

Fuck that cripple bitch bullshit.  

Principle reduction, modification of the mortgage to once again stake ownership on the property and eliminate prior malfeseance, and I would not be surprised AT ALL to see some sort of contingency or arrangements for payment of the principle in alternate currnecies in case of USD defaults.  

No way would I sign off on a mortgage now without a LOT of legal review.

Wed, 08/03/2011 - 11:32 | 1520807 SilverRhino
SilverRhino's picture

Fuck that cripple bitch bullshit.  

Principle reduction, modification of the mortgage to once again stake ownership on the property and eliminate prior malfeseance, and I would not be surprised AT ALL to see some sort of contingency or arrangements for payment of the principle in alternate currnecies in case of USD defaults.  

No way would I sign off on a mortgage now without a LOT of legal review.

Wed, 08/03/2011 - 12:58 | 1521079 jmc8888
jmc8888's picture

How can they do that? They don't own the loans.


Wed, 08/03/2011 - 13:53 | 1521366 EManBevHills
EManBevHills's picture

Just another form of extend and pretend rather than mark to market.


Wed, 08/03/2011 - 14:15 | 1521462 KCMLO
KCMLO's picture

Ah, so in exchange for legal protection BofA is going to allow their customers to apply for a principal reduction?  Sure, why not?  They showed an amazing ability to stretch these on for months, lose paperwork, disqualify valid claims, and just overall find ways not to approve a single one under the previous round.  Why not do it all again?  If regulators agree to this they might as well take a big steaming shit on everyones' lawn that's a BofA customer.

You can't sue BofA but you can go ahead and ask them nicely if you can jump through hoops for over a year only to be denied all over again.  Bullshit.

Wed, 08/03/2011 - 14:19 | 1521468 KCMLO
KCMLO's picture

By the way, I'm not trying to be light on the deadbeats either, but what's the point in stringing along broke people just so BofA can screw them all over again?  Yet another piece of (proposed) goverment action to protect a TBTF bank.

Wed, 09/14/2011 - 04:41 | 1667344 chinawholesaler
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