Bank of America Corporation Foreclosure and Claims Process Review
March 12, 2012 2012-FW-1802
FOR: Charles S. Coulter, Deputy Assistant Secretary for Single Family Housing, HU
Craig Clemmensen, Director, Departmental Enforcement Center, CACB
FROM: Gerald R. Kirkland, Regional Inspector General for Audit, 6AGA
SUBJECT: Bank of America Corporation Foreclosure and Claims Process Review Charlotte, NC
INTRODUCTION AND BACKGROUND
As part of the Office of Inspector General’s (OIG) nationwide effort to review the foreclosure practices of the five largest Federal Housing Administration (FHA) mortgage servicers (Bank of America, Wells Fargo Bank, CitiMortgage, JP Morgan Chase, and Ally Financial, Incorporated), we reviewed Bank of America’s foreclosure and claims processes. In addition to this memorandum, OIG issued separate memorandums for each of the other four reviews.1 OIG also plans to issue a summary memorandum reporting the results of all five memorandums. OIG performed these reviews due to reported allegations made in the fall of 2010 that national mortgage servicers were engaged in widespread questionable foreclosure practices involving the use of foreclosure “mills” and a practice known as “robosigning”2 of sworn documents in thousands of foreclosures throughout the United States.3
Bank of America is a supervised FHA direct endorsement lender that can originate, sponsor, and service FHA-insured loans. During Federal fiscal years 2009 and 2010, it submitted 36,095 FHA claims totaling $5 billion.4 number during the review period.5 Approximately 90 percent of its claims during the review period, totaling more than $4.5 billion, were for loans previously serviced by Countrywide. In early October 2010, Bank of America stated that it would halt judicial foreclosures while it reviewed its policies and procedures. On October 18, 2010, it issued a press release reporting that it had completed its review of judicial foreclosures and while it had identified no problems, it would resubmit 102,000 affidavits in judicial foreclosure cases that had not yet gone to judgment. On October 22, 2010, the U. S. Department of Housing and Urban Development (HUD) issued a notice of violation informing Bank of America that it was considering administrative actions and civil money penalties based on findings identified in its July 2010 servicing review.
From the beginning of our review in October 2010, Bank of America limited our access to employees and information. After attempting to conduct interviews within Bank of America’s established protocols without success, the U. S. Department of Justice (DOJ) assisted us by obtaining testimony through civil investigative demands (CID).6 Because we identified potential False Claims Act7 violations, in February 2011, we provided DOJ with our analyses and preliminary conclusions as to whether Bank of America engaged in the alleged foreclosure practices.
DOJ used our review and analysis in negotiating a settlement agreement with Bank of America. On February 9, 2012, DOJ and 49 State attorneys general announced a proposed settlement of $25 billion with Bank of America and four other mortgage servicers for their reported violations of foreclosure requirements. As part of the proposed settlement agreement, each of the five servicers will pay a portion of the settlement to the United States and must undertake certain consumer relief activities. The proposed settlement agreement described tentative credits that each mortgage servicer would receive for modifying loans, including principal reduction and refinancing, and established a monitoring committee8 and a monitor to ensure compliance with agreed-upon servicing standards and the consumer relief provisions. Once the final settlement agreement has been approved by the court, OIG will issue a separate summary memorandum detailing each of the five servicers’ allocated share of payment due as a result of the settlement agreement.
Our objective was to determine whether Bank of America complied with applicable foreclosure procedures when processing foreclosures on FHA-insured loans.
Full report below…
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