Bank of Americas’s stock beat a bit of a retreat today as its so called $8.5 billion settlement came under increased fire. Frankly, the number of objections filed prior to late afternoon yesterday and today meant it was dead in its current form. At best, it would take a two or three years and a bigger price tag for any deal to be concluded (although we are in the skeptics’ camp, particularly as far as the currently overly broad waiver of liability is concerned).
Nevertheless, the latest developments pound more nails into the coffin. Yesterday, as we noted, the FDIC filed a minimalist objection, saying the disclosures were inadequate for it to know whether it would oppose the deal or not. Today, a suit by several homeowners, supported by the National Consumer Law Center, flagged an issue that we highlighted in our initial comments on the deal: that the settlement included provisions to manage foreclosures to strict timetables, designed to speed them up. That was one of the “gimmies” to investors, and homeowner advocates are none too happy. Per the New York Times:
On Tuesday, several homeowners filed suit in the Federal District Court in Manhattan seeking to block a proposed $8.5 billion settlement between Bank of America and major mortgage investor..The suit claims that the deal fails to address widespread servicing problems and would actually speed up foreclosures..
“There is a growing realization that this settlement needs more scrutiny,” said Keith Fleischman, the lawyer for the four homeowners in the suit. “It needs to address the housing crisis itself.”
Lawyers for the National Consumer Law Center said in a report prepared as part of the suit that the proposed settlement “will speed up foreclosures, perpetuate existing servicing abuses in the system, and undermine federal programs designed to stabilize the housing market.”
“The touted servicing ‘improvements’ aim to increase the speed of foreclosures but fail to set standards to protect homeowners from wrongful or unnecessary foreclosure or abusive servicing,” they added.
The Times story, as almost an aside, mentioned another legal development which appears significant:
On Tuesday, U.S. Bancorp, the trustee of a $1.75 billion mortgage pool originated by Countrywide in 2005, filed a lawsuit to force Bank of America to buy back the underlying mortgages, arguing the loans were made without proper documents and didn’t conform to underwriting standards.
This matters because the $8.5 billion settlement involves pretty much all, if not all, of the Countrywide mortgage securitizations which had Bank of New York as trustee. As we pointed out, citing research by Adam Levitin, BoNY was the house trustee for Bank of America’s RMBS, and could therefore be expected to be particularly accommodating to any requests made by Bank of America. The fact that a different trustee isn’t playing ball and instead is putting back loans would seem to strengthen the case of attorneys general Eric Schneiderman and Beau Biden, both of whom questioned the role Bank of New York was playing in the deal (it was getting an expanded indemnification from Bank of America, which is tantamount to a bribe).
As Tom Adams noted via e-mail,
This proposed $8.5 billion settlement has turned out to be a disaster for BofA – it has prompted discovery and crystalization of a whole host of other claims. Since it seems likely, especially given the Fed’s and Fannie’s presence in the settlement group, that the administration favored this settlement, it is also a bit of a disaster for the administration’s attempt to sweep the MBS problems under the rug.
We’ve long felt that there is still enough of an independent judiciary in the US to make it impossible to bury the widespread abuse of legal procedures that took place in the mortgage boom and its aftermath. So these setbacks to Bank of America offer hope that enough of the rule of law is operating to impede at least some aspects of the banking industry’s combined pillage/coverup operation.
30 comments
Comments are closed.
How can we conclude that Obama has a moral compass? He belongs in a horror movie. He is willing to perpetuate immoral wars and kill millions of innocent people just as he is willing to ruin the lives of millions of Americans, his fellow citizens, by destroying their livelihoods, retirements, etc. I think he is subhuman.
Obama has a moral compass. It points to E, for Evil.
my objection with him is over his intentional disregard of the law by his choice to not investigate and prosecute the most egregious, most pernicious, most systemic financial fraud of anyone’s lifetime.
for that, he is will forever be a massive FR$UD of a person to me – which i think is significant since he was the first person i ever voted for in my middle aged life
oops, …he is _and_ will forever be…
What’s that? A Chicago politician turned out to have a wide stripe of windy city styled corruption down his back? I’m shocked! Next up, we’re gonna pull a(nother) Texas governor who turns out to be fucking clown shoes inept? Crazy.
Gordon Brown was supposed to have a ‘moral compass’ and look at what a corrupt, warmongering fraudster he turned out to be.
Corrupt warmongering fraudsters needed their Banks to conduct the illegal invasions, bombings, assasinations that continue in the background of our American experience.
Now, if Banks were to directly drone strike ‘Mericans in steerage to speed up the eviction process, we’d have the symbolism necessary to impress the proletarians into overwhelming action against this tyranny.
Dear Skits;
Check up some earlier posts on this blog having to do with Homeland Security and others setting up the apparatus for domestic use of drone flights inside America. The subject of your hopefully sarcastic comment is probably already in the pipeline. Me, I’m going to start a franchise chain of tinfoil hat boutiques. A growth industry in the making.
Several means 3 homeowners. What happens if we get 1000s of homeowners launching similar petitions?
I think I prefer the classification of “few”, “several” and so forth from Heroes of Might and Magic:
Few: 1-4
Several: 5-9
Pack: 10-19
Lots: 20-49
Horde: 50-99
Throng: 100-249
Swarm: 250-499
Zounds: 500-999
Legion: 1000 +
I hope there are many legions in these petitions.
Thank you for the vocabulary insight, etc.
It could become a class action on behalf of other similarly situated homeowner. There are more shoes to drop.
Lawyers in SLC are seeking homeowners who were illegaly foreclosed on by Bank of America. Homeowners are filing suit. Recon Trust has a huge problem in Utah as they were never chartered to do business in that state.
Dear Smithy;
The problem is, the elites have forseen that problem and got their lackeys on the Supreme Court to make “Class Action” status very difficult to achieve. It will probably have to be slugged out state by state.
So, President Obama….
About Tim Miller pressuring Eric Schneiderman…
Changed your mind on all that yet?
All that being against the rule of law business everyonewas talking about from Denninger to Ritholz to Yves and Dayen and Salmon and Durben and… well, you get the idea.
BofA are scum and frauds, these fuckers days are numvered they will go belly up!
ProPublica is reporting today … “The state of Nevada dramatically expanded its lawsuit against BOA today … charges that BOA and the now-defunct mortgage giant Countrywide acquired by the bank in 2008, deceived borrowers and investors at almost every stage of the process.”
Schneiderman is getting increased company.
note to self: if Miller’s at the bar, don’t pick up his tab. it’s gonna be high.
Gretchen Morgenson is on this tonight via NYT. Shockingly ugly stuff —
http://www.nytimes.com/2011/08/31/business/bank-of-america-accused-of-breaching-mortgage-accord.html?hp
“The attorney general of Nevada is accusing Bank of America of repeatedly violating a broad loan modification agreement it struck with state officials in October 2008 and is seeking to rip up the deal so that the state can proceed with a suit against the bank over allegations of deceptive lending, marketing and loan servicing practices.
[snip]
“For example, the complaint says the bank advised credit reporting agencies that consumers were in default when they were not, and contends that Bank of America employees deceived borrowers about why their requests to modify loans were denied. In addition, it says, the bank falsely claimed that the actual owners of loans had refused to allow changes to their mortgages, and it incorrectly claimed that borrowers had failed to make payments on trial loan modifications when in fact they had. Bank of America also misled borrowers, the Nevada attorney general’s filing noted, by offering loan modifications with one set of terms only to come back with a substantially different deal.
“Among the more troubling findings in the Nevada complaint is the contention by several Bank of America employees that the company imposed strict limits on the amount of time they could spend on the phone assisting troubled borrowers seeking help with their loans.”
Actually, the “buck stops” at the Judiciary. Always. That is their assigned independent role in our Republic. Executive and Legislative opinion doesn’t really matter when any point is at issue if someone just has the guts to take an argument to court. The Judicial opinion rules.
Outside rule of incited mob elections, the Judiciary is our most successful branch of government. It stands as an argument against expanded democracy. In fact, the Judiciary in the states should also be lifetime appointments subject to impeachment proofs. The Judiciary is the government branch most hated, attacked and made more expensive to use by ignorant Right executives and legislators.
Bank of America (and next the other hot-derivative creating big banks) will be whipped raw over and over and over for the next 15 years at least by the Judiciary. (I base this on a reading of several hundred mbs cases heard since 2004. There are many many cases in the courts right now…and growing quickly as it is realized that investors own the homes but can’t repo them and the banks are getting “free” homes through foreclosures, all of them which will be overturned and retried eventually…like I say: 15 years at least!!! Watch it happen.)
I agree with you that for-profit banking is a menace that should be eradicated.
Also, “abusive servicing”- isn’t that redundant?
Lifetime appointments are nastily subject to corruption in the appointment process, as we’ve found out at the federal level; it is far too tempting to stuff real hacks into place if you know you can keep them there for life, and the result is Scalia, Thomas, Alito, Roberts, and numerous lower court judges.
I prefer NY’s 14-year appointments.
Yves, I have to ask a simple question – what would happen if the global banking system collapsed? I happen to believe it would be messy, but functionally fixed in a manner of months if not weeks while a lengthy process of who gets what out of the smoldering ruins would take years. You see, I happen to believe that for-profit commercial banking is a menace that should be eradicated. I find that few share my view. They often look at me as if I have completely lost my mind and express extreme fear that “the system” might collapse. I find myself thinking, “So what if a pack of blood-sucking vampires is exposed to the sun and they all die?”, but my anger may prevent me from thinking clearly. So, who are the clear thinkers here – those scared to death that the system might collapse, or me, hoping it happens sooner rather than later?
BTW – I don’t think a 500-word essay would do, you might make this subject the focus of your next book – or at least a chapter.
Add this to the mix, and please don’t ask why I can’t stop laughing tonight….
Subprime Mortgage Bonds Get AAA Rating From S&P Denied to U.S.
http://www.businessweek.com/news/2011-08-30/subprime-mortgage-bonds-get-aaa-rating-from-s-p-denied-to-u-s-.html
“Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government.”
At it AGAIN!!!! Not too late to sue S&P too?
S & P and Moodys are being sued by CALPERS related to thier ratings on SIVs. Fitch settled with CALPERS on Monday.
As an aside, those interested in following MBS litigation should check out Alison Frankel’s “On the Case” at Thompson Reuters Legal website. She does a fairly good job summarizing the legal developments and filings related to BAC and other MBS-related litigation.
Death by a thousand cuts. This could be a new strategy for democracy.
Interestingly I think “death by a thousand cuts” always *was* the strategy for democracy. Democracy’s great advantage in power politics is and has always been *numbers*.
There’s enough venom here to start a biotherapy tech firm. Some people need to dial it down a notch or two before they develop a psychosis.
During a chapter 13 bankruptcy proceeding, a judge can eliminate or modify many different types of debt. They are currently prohibited, however, from modifying the terms or reducing the principle of a first mortgage on a primary residence.
The US Bank lawsuit is very interesting. Warren Buffett aka Berkshire owns 3.6% of US Bank.
He is now suing BofA which they just bought $5 Billion in preferred.
And now there are 53 depos of BofA that will be used in all these cases to make the liability.
http://www.bloomberg.com/news/2011-08-31/new-york-attorney-general-deposed-53-in-bank-of-america-case.html
This stock will see a 6 handle before a 10 handle.