Largest Bank Will Resume Foreclosure Push In 23 States
Bank of America announced on Monday that it would resume home foreclosures in nearly two dozen states, despite the running controversy over how banks handled tens of thousands of cases of homeowners facing eviction.
Bank of America, the nation’s largest bank and the servicer of roughly one in five American mortgages, insisted that it had not found a single example where a foreclosure proceeding was brought in error.
The move is also likely to encourage other giant lenders, like JPMorgan Chase, to resume the foreclosure process that threatens two million homeowners.
Meanwhile, GMAC Mortgage, whose procedures helped prompt the controversy when one its executives testified that he had signed 10,000 documents in a month, is also proceeding with foreclosures.
“We announced a temporary suspension of evictions and foreclosure sales in the 23 judicial states several weeks ago so we could commence the appropriate review,” said Gina Proia, a spokeswoman for GMAC. “As cases are being reviewed and, when needed, remediated, the foreclosure process moves forward as appropriate.”
Guy Cecala of Inside Mortgage Finance, an industry publication, said: “This draws a line in the sand that the banks expect this problem will be over in relatively short order and it will be back to business as usual. If Bank of America can do it, certainly the smaller ones will follow suit.”
Bank of America plans to begin filing new paperwork for 102,000 foreclosures by Monday.
Consumer advocates and lawyers for homeowners expressed skepticism that Bank of America could complete a review of the paperwork so quickly. But the banking industry has come under increasing pressure from investors to resolve the problem.
Investors have fled bank stocks in recent days, worrying that the foreclosure halt would cost banks billions of dollars and inflict further harm on the nation’s struggling housing market. Bank of America is scheduled to report its latest quarterly results on Tuesday. Its shares have suffered more than those of other big banks, so any sign that the crisis is easing is likely to be greeted favorably by shareholders.
Reports of improper procedures at mortgage servicers, like having officials sign thousands of documents a month — so-called robo-signers — also have set off a political furor. On Wednesday, all 50 state attorneys general announced an investigation of mortgage servicing.
Bank of America said it would resume foreclosures in the 23 states where judicial approval was required after an internal review turned up no evidence that cases were filed in error.
However, Bank of America’s suspension will remain in effect in the 27 other states that do not require a judge’s approval to foreclose, as the bank’s paperwork review proceeds state by state. It was the only bank to initiate a nationwide freeze.
“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” said Barbara J. Desoer, president of Bank of America Home Loans. “We paused while we were doing that, and now we’re moving forward.”
In the other 27 states, Ms. Desoer said, she expects foreclosures to resume within weeks.
Bank of America was careful to note that the major holders of mortgages — Fannie Mae and Freddie Mac — as well as private investors had signed off on its decision and had been consulted during the review. Of the 14 million mortgages it services — about $2.1 trillion worth — about half are owned by Fannie Mae and Freddie Mac, the giant mortgage holding companies now controlled by the Treasury.
About 30 percent are owned by institutional investors, like hedge funds, pension funds and insurance companies, while Bank of America holds 20 percent.
“We voluntarily paused our process in the 23 judicial states, not because there was evidence of problems — there was not — but because we wanted to ensure our customers they are being treated fairly,” said Dan Frahm, a bank spokesman.
Even as Bank of America and GMAC signaled their resumption of foreclosures, a Citigroup executive said the company was confident in its procedures. “The integrity of Citi’s foreclosures process is sound,” John C. Gerspach, Citigroup’s chief financial officer, said on a conference call.
In Bank of America’s case, the foreclosures are resuming in the 23 states where judicial procedure is required because the halt was initiated there first, on Oct. 1. It was extended to the other 27 states on Oct. 8.
From the beginning, Bank of America signaled that it did not expect the review to go on for an extended period. On Oct. 8, its chief executive, Brian Moynihan, promised a quick conclusion.
Countrywide’s Former Chief In Settlement Of Fraud Case
Angelo R. Mozilo, the founder and former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, agreed to pay $67.5 million Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year.
The settlement came just days before the case against Mr. Mozilo and two former colleagues was scheduled to go to trial before a jury in Los Angeles.
The two colleagues settled their cases Friday as well. David Sambol, the former president of Countrywide, agreed to pay $5.52 million, and Eric Sieracki, the former chief financial officer, consented to $130,000.
Under the agreement, the three men did not admit wrongdoing.
Mr. Mozilo’s agreement with the government represents a humbling moment for one of most audacious and flamboyant chief executives in the financial industry. The son of a Bronx butcher, Mr. Mozilo started Countrywide in 1969 with David Loeb, a business partner; together the men built the company into a behemoth with $11.4 billion in revenues at its peak in 2006.
But Countrywide’s foray into subprime lending and other risky loans led to its downfall, and in early 2008, hobbled by mounting losses on loans, the company was purchased by Bank of America in a fire sale. Mr. Mozilo left the company shortly thereafter.
In its complaint filed in June 2009, the S.E.C. had accused Mr. Mozilo, Mr. Sambol and Mr. Sieracki of hiding from investors the growing risks in Countrywide’s operations. The complaint also contended that Mr. Mozilo and Mr. Sambol improperly generated profits on insider stock sales even as they were alerted to the company’s widening woes.
Mr. Mozilo was not present for the court hearing.
Mr. Mozilo’s trial had been widely anticipated because it represented one of the few public prosecutions of a case against a major participant in the mortgage crisis. Still, both the defense and the prosecution faced big risks if they lost at trial, legal experts said, and this may have propelled the recent negotiations to bring about the deal. The settlement was approved by John F. Walter, the federal judge overseeing the case.
Had the S.E.C. won the case, it would have helped the agency re-establish its reputation as an investor advocate, which was badly damaged by inaction in the years leading up to the Madoff Ponzi scheme and the mortgage debacle. A loss would have been another black eye for the S.E.C.
A victory would also have been crucial for Mr. Mozilo, who would be concerned that a criminal prosecution might follow a loss in the civil case.
Sources: AP, CBS News, CNN, NY Times, Countrywide, BOFA, Youtube
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