Bank of America SEC 10Q Filing – Servicing Matters and Foreclosure Processes: $1.3 Billion for Fraudclosure Delays (and more)

Was just looking through BAC’s 10Q Report that was filed last Friday and came up with the info below…

Other Mortgage-related Matters

Servicing Matters and Foreclosure Processes

We service a large portion of the loans we or our subsidiaries have securitized and also service loans on behalf of third-party securitization vehicles and other investors. Servicing agreements with the GSEs generally provide the GSEs with broader rights relative to the servicer than are found in servicing agreements with private investors. For example, each GSE typically has the right to demand that the servicer repurchase loans that breach the seller’s representations and warranties made in connection with the initial sale of the loans even if the servicer was not the seller. The GSEs also reserve the contractual right to demand indemnification or loan repurchase for certain servicing breaches. In addition, the GSEs’ first mortgage seller/servicer guides provide for timelines to resolve delinquent loans through workout efforts or liquidation, if necessary, and purport to require the imposition of “compensatory” fees if those deadlines are not satisfied except for reasons beyond the control of the servicer. In addition, many non-agency RMBS and whole-loan servicing agreements require the servicer to indemnify the trustee or other investor for or against failures by the servicer to perform its servicing obligations or acts or omissions that involve willful malfeasance, bad faith or gross negligence in the performance of, or reckless disregard of, the servicer’s duties. Although it is not possible to reasonably estimate our liability with respect to potential servicing-related claims, the amount of such liability could be material.

In October 2010, we voluntarily stopped taking residential mortgage foreclosure proceedings to judgment in states where foreclosure requires a court order following a legal proceeding (judicial states) and stopped foreclosure sales in all states in order to complete an assessment of related business processes. We have resumed foreclosure sales in all non-judicial states; however, while we have recently resumed foreclosure proceedings in nearly all judicial states, our progress on foreclosure sales in judicial states has been significantly slower than in non-judicial states. We have also not resumed foreclosure sales for certain types of customers, including those in bankruptcy and those with FHA-insured loans, although we have resumed foreclosure proceedings with respect to certain customers in bankruptcy and with FHA-insured loans. The implementation of changes in procedures and controls, including loss mitigation procedures related to our ability to recover on FHA insurance-related claims, as well as governmental, regulatory and judicial actions, may result in continuing delays in foreclosure proceedings and foreclosure sales, as well as creating obstacles to the collection of certain fees and expenses, in both judicial and non-judicial foreclosures.

On April 13, 2011, we entered into a consent order with the Federal Reserve and BANA entered into a consent order with the Office of the Comptroller of the Currency (OCC) to address the regulators’ concerns about residential mortgage servicing practices and foreclosure processes. Also, on this date, the other 13 largest mortgage servicers in the U.S. separately entered into consent orders with their respective federal bank regulators related to residential mortgage servicing practices and foreclosure processes. The orders resulted from an interagency horizontal review conducted by federal bank regulators of major residential mortgage servicers. While federal bank regulators found that loans foreclosed upon had been generally considered for other alternatives (such as loan modifications), were seriously delinquent, and that servicers could support their standing to foreclose, several areas for process improvement requiring timely and comprehensive remediation across the industry were also identified. We identified most of these areas for process improvement after our own review in late 2010 and continue to make significant progress in these areas. The federal bank regulator consent orders with the mortgage servicers do not assess civil monetary penalties. However, the consent orders do not preclude the assertion of civil monetary penalties and a federal bank regulator has stated publicly that it believes monetary penalties are appropriate.

The consent order with the OCC requires servicers to make several enhancements to their servicing operations, including implementation of a single point of contact model for borrowers throughout the loss mitigation and foreclosure processes, adoption of measures designed to ensure that foreclosure activity is halted once a borrower has been approved for a modification unless the borrower fails to make payments under the modified loan and implementation of enhanced controls over third-party vendors that provide default servicing support services. In addition, the consent order required that servicers retain an independent consultant, approved by the OCC, in order to conduct a review of all foreclosure actions pending, or foreclosure sales that occurred, between January 1, 2009 and December 31, 2010 and submit a plan to the OCC to remediate all financial injury to borrowers caused by any deficiencies identified through the review. The OCC accepted the independent consultant that we retained to conduct the foreclosure review and approved our action plan related to the review. Through the foreclosure review, which began in October 2011, eligible borrowers will have the opportunity to request a review by the independent consultant beginning in November 2011. Because the review process will be available to a large number of potentially eligible borrowers and will involve an examination of many details and documents, each review could take several months to complete. It is not yet possible to determine how many borrowers will request a review, how many borrowers will meet the eligibility requirements or how much in compensation might ultimately be paid to eligible borrowers.

In addition, law enforcement authorities in all 50 states and the DOJ and other federal agencies continue to investigate alleged irregularities felonies in the foreclosure practices of residential mortgage servicers, including us. Authorities have publicly stated that the scope of the investigations extends beyond foreclosure documentation practices to mortgage origination, loan modification and loss mitigation practices, including compliance with HUD requirements related to FHA-insured loans. We continue to cooperate with these investigations and are dedicating significant resources to addressing these issues. We and the other largest mortgage originators and servicers continue to engage in ongoing negotiations regarding these matters with law enforcement authorities and federal agencies. Although certain states’ Attorneys General have recently withdrawn from global settlement negotiations related to these matters, the negotiations remain ongoing and are focused on the amount and form of any settlement payment or commitment and additional settlement terms, including principal forgiveness, servicing standards, enforcement mechanisms and releases. We cannot be certain as to the ultimate outcome that may result from these negotiations or the timing of such outcome.

We continue to be subject to additional borrower and non-borrower litigation and governmental and regulatory scrutiny related to our past and current servicing and foreclosure activities. This scrutiny may extend beyond our pending foreclosure matters to issues arising out of alleged irregularities felonies with respect to previously completed foreclosure activities. The current environment of heightened regulatory scrutiny has the potential to subject us to inquiries or investigations that could significantly adversely affect our reputation. Such investigations by state and federal authorities, as well as any other governmental or regulatory scrutiny of our foreclosure processes, could result in material fines, penalties, equitable remedies, additional default servicing requirements and process changes, or other enforcement actions, and could result in significant legal costs in responding to governmental investigations and additional litigation.

In the three and nine months ended September 30, 2011, we incurred $350 million and $1.9 billion of mortgage-related assessments and waivers costs which included $244 million and $1.3 billion for compensatory fees that we expect to be assessed by the GSEs as a result of foreclosure delays with the remainder being out-of-pocket costs that we do not expect to recover because of foreclosure delays. We expect that these costs will remain elevated as additional loans are delayed in the foreclosure process and as the GSEs assert more aggressive criteria. We also expect that additional costs related to resources necessary to perform the foreclosure process assessment, to revise affidavit filings and to implement other operational changes will continue for at least the remainder of 2011. This will likely result in continued higher noninterest expense, including higher default servicing costs and legal expenses in CRES, and has impacted and may continue to impact the value of our MSRs related to these serviced loans. It is also possible that the delays in foreclosure sales may result in additional costs and expenses, including costs associated with the maintenance of properties or possible home price declines while foreclosures are delayed. In addition, required process changes, including those required under the consent orders with federal bank regulators, are likely to result in further increases in our default servicing costs over the longer term. Finally, the time to complete foreclosure sales may continue to be protracted, which may result in a greater number of nonperforming loans and increased servicing advances and may impact the collectability of such advances and the value of our MSR asset, MBS and real estate owned properties.

An increase in the time to complete foreclosure sales also may increase the number of severely delinquent loans in our mortgage servicing portfolio, result in increasing levels of consumer nonperforming loans and could have a dampening effect on net interest margin as nonperforming assets increase. Accordingly, delays in foreclosure sales, including any delays beyond those currently anticipated, our continued process enhancements, including those required under the OCC and federal bank regulator consent orders and any issues that may arise out of alleged irregularities in our foreclosure process could significantly increase the costs associated with our mortgage operations.


16 Responses to “Bank of America SEC 10Q Filing – Servicing Matters and Foreclosure Processes: $1.3 Billion for Fraudclosure Delays (and more)”
  1. CaitlinO says:

    Well, at least the long-sufferent stockholders of BOA can’t say they weren’t warned. Though the bankster’s estimates of potential losses look seriously low to my jaundiced eye.

    The stock has already lost nearly 90% of its peak value under Lewis and Moynihan. There should be a pool started on when it’s going to face delisting.

  2. talktotennessee says:

    Is this just gobblety gook to say they are foreclosing in nonjudicial states on some loans and not on others and they are foreclosing in judicial states on some loans but not others and the time frame is longer in judicial states, Is this doublespeak or what!!!! They are saying they have a right to their exorbitant fees in the process of doing what they want to do because they have the right. Is that about right? Is that about the jest of this load of garbage?

    • leapfrog says:

      Yes, that’s what I got out of it too. Where is the lady with the aerosol can and the caption, “Smells Like BS” when we need her?

  3. Linda says:

    Thanks for posting what the banksters say, write, publish, and what we know as facts. This site has truly helped me fight for my home, and know that I was right when they tried to take my home.

  4. Ron Moss says:

    You mean there is not any more free houses But my banker promised to go to jail and he was not going to fight to save Ally -GMAC its your choice no get out of jail free for him.

  5. john says:

    What a bunch of convoluted crap! All of those fines, fees, etc incurred by BofA could have gone a long way toward settling individual claims by homeowners subject to myriad forms of fraud conducted in a willful and egregious manner.

  6. Hope servicers advised pay what you can, which was the second, then the new plan was the second lien holder carried the initial modification; all that created was the second lien holder lp servicing had you continue to pay 1+yrs thinking you were in negotiation only to be foreclosed and then critized for not paying first lien, and the payments on the seconds and or first went into a different account so you were always still considered late; what the banks told agents trying to short sell/or some were in it only to have it become a reo??? no one has even bothered to check this out, all falls on the homeowner, the only one person??? that lasted one day!!! that is such a lie and fraudulent way of even responding to anything submitted, the only time one calls you directly is if you have nuanced yourself to certain parties and they want answers, the day after foreclosure on property the bank refused to work on, the bank calls and says they received a call from?? and were supose to help me??? too late it is foreclosed?? after clearing that it was handled wrong, it went no where, this is all about the banks servicers refusing to help, charging the bank numerous dollars in this situation under the current employment situation serves no purpose, you should sell the homes back at current rate, fix their credit at the minimum, and just maybe they should be required to hire and train numerous persons unemployed, that I am sure have related experience. And Hud/Fannie and the Real Estate Corp. and Management Co. of California need to be held accountable for their deceitful lies and mishandling of taxpayer monies, cash for keys was to be given to keep properties well maintained, to help those down on their luck thaT had no monies and no where to go, those abused by prior homeowners, property managers should receive moving compensation and the management/realators defaulting california law should have their licenses suspended; blight??? is anyone checking this?? on 3 of my streets I was the one taking care of the properties, by choice, it still irked me to see the little agent notices that had thrown out good people trying for assistance and they can;t even mow the lawn afterwards, or the fraudulent tenants of which there have been many, all trying to scam it, walking away with numerous cash outs, something is wrong with this picture, cash for keys?? I think one should check who pays the bills??? Is it really that hard???this wholemess makes me ill, I can;t wait to get away from it, hope to never buy a home again, and never use a bank again, and never, never ever trust anyone with a commission based salary even if you sleep with them RUN Run! very fast!

  7. Katheryn says:

    Oh Boo Hoo Hoo. Poor little victims. My heart bleeds for you. NOT

    • Bobbi Swann says:

      Do you know what happens to people when they are out-numbered, Katheryn? If you made it past the 5th grade in elementary school you might be smarter than a 5th grader…..but I doubt it! There is power in numbers, big numbers, great big numbers….and you are ONE. Mind you, not the 1%, but just ONE against many. Best advice I can offer you….don’t waste your idiot comments on this site. It not only shows your total ignorance but it also makes us aware that there are still ‘others’ out there drinking the Koolaid.

      • Katheryn says:

        Bobbi – Obviously you have not followed the fact that I have been one of the supporters here and other places for a long long time. I just completed answering Bastard of America’s Interrogatoris and just mailed them my Production of Documents Request which was 15 pages….needless to say reading their “poor” little bank monologue hit real hard. I have spent nine months doing nothing but fighting Bastards of America pro se….but you may know a 5th grader capable of that. I am trying to save my home, have lost all of my savings and have nearly had a nervous breakdown trying to prevent foreclosure, sue them and fend off four different law firms they have fighting me! More power to ya sweetheart. Why don’t you read before you leap.

      • notmyhomeyournot says:

        Let’s not fight each other…………That’s what they want, United we stand, Divided we will fall.
        I believe we will succeed with the help of God who will put the right answers in front of you, as he has done for me, as long as you have the utmost belief the God is here with us, and is working behind the lines, and setting things in motion. Have Faith and patients, for the time is neigh.

    • Mary says:

      To bobbie. Hear Hear…. I could not have said it better myself:)
      To Katheryn. Troll much?

      • Mary says:

        Ooops I leaped before I read:( Sorry Katheryn Thought you were criticizing a victim. I apologize?

      • Mary says:

        Ooops I leaped before I read:( Sorry Katheryn Thought you were criticizing a victim. I apologize. I will make sure next time I read the whole text first. Sorry again.

      • Katheryn says:

        Mary – it is hard on all of us. Thanx. The day I side with the 1% is the day I shoot myself. lol

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