Bank of America Death Watch Update: Lawsuit in Washington, Elevated GSE Claims | |
| By: David Dayen Friday August 5, 2011 10:16 am | |
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It’s not just Eric Schneiderman. Bank of America faces a new lawsuit from the state of Washington, whose Attorney General, Rob McKenna, is a Republican.
The case involves ReconTrust, a foreclosure trustee that forecloses loans serviced by BofA and is wholly owned by BofA as well. McKenna argues in the court filing that ReconTrust has “failed to comply with the procedures of the Deed in Trust Act in each and every foreclosure it has conducted since June 12, 2008.” That’s pretty unequivocal.
Among other things, ReconTrust doesn’t have a physical office in Washington, as required by state law. So homeowners facing foreclosure don’t have a physical site to register their complaint with the trustee.
ReconTrust is also supposed to be under state law a neutral third party in managing foreclosures and trustee sales. Yet they are clearly biased on behalf of the lender – aside from being owned by them. They have also failed to contact borrowers about foreclosures, failed to prove that the borrower is in default and that the lender owns the property, failed to conduct trustee sales in public, and failed to legally produce documents relevant to the foreclosure. This includes robo-signing and document fabrication. McKenna also accuses ReconTrust of illegal fee increases and a lack of transparency.
ReconTrust’s only alibi here is that federal law pre-empts the state’s Deed in Trust Act, leaving the state unable to pursue the claim. Needless to say, McKenna doesn’t think much of that. He is asking for $2,000 for every violation, and remember, the assessment is that every foreclosure ReconTrust has conducted since mid-2008 has been fraudulent.
And that’s not all. You may remember that BofA started this kickoff of settlements by closing out claims with Fannie Mae and Freddie Mac on repurchases of bad mortgage bonds. That was supposed to top out at $3 billion. But it looks like that number will increase:
New demands for refunds on soured loans from the two government-sponsored enterprises are coming “in numbers that were not expected based on historical experience,” the Charlotte, North Carolina-based bank said yesterday in its quarterly filing. Fannie Mae and Freddie Mac are being “more rigid” in resolving demands, said the bank, the worst performer today in the Dow Jones Industrial Average.Chief Executive Officer Brian T. Moynihan, 51, has booked about $30 billion in settlements and writedowns to clean up faulty mortgages at the biggest U.S. bank since succeeding Kenneth D. Lewis last year. In June, the firm said that second- quarter charges for soured loans would probably be enough to cover remaining repurchase liabilities unless the “behavior” of the two GSEs changed from previous experience.“Yet again, another line in the sand from Bank of America turns out to be fungible,” said Tony Plath, a professor of finance at the University of North Carolina in Charlotte. “I don’t think it’s anything nefarious, it’s just that they don’t know what the magnitude of losses in that portfolio will be — and until they do, none of their numbers have credibility.”
Precisely. And this is why BofA is getting killed in the market today. They cannot stop the bleeding.
We may need to start a death pool.
35 Comments35 Responses to “Bank of America Death Watch Update: Lawsuit in Washington, Elevated GSE Claims”
Login to ReplyThingsComeUndone August 6th, 2011 at 1:30 pm
Naked Capitalism began a Death Watch for BOA recently I would short the stock if I had the cash but I fear Obama will use my SS and Medicare money to bail them out again.
In response to ThingsComeUndone @ 2
Yep, so true. Calif. is now issueing debt cards for UI it’s on a card from bofa.
ThingsComeUndone August 6th, 2011 at 1:35 pm
New demands for refunds on soured loans from the two government-sponsored enterprises are coming “in numbers that were not expected based on historical experience,
The banks math models were tweaked to justify bad loans by saying that such high levels of defaults could never happen.
After the bank bailout the banks kept doing what they were doing gambling not writing off their bad loans or unloading them they should have updated their models to include the banking crisis.
After the bank bailout the banks kept doing what they were doing gambling not writing off their bad loans or unloading them they should have updated their models to include the banking crisis.
PeasantParty August 6th, 2011 at 1:38 pm
They only went back to 2008?
Deeds and Deeds of Trust must be recorded together on the same date, minutes apart at the Registar of Deeds Office. I’ve said this many times, but since BOA and its subsidiaries were more interested in throwing families out into the streets I guess they never noticed that some laws just don’t hide under the rug.
In response to ThingsComeUndone @ 2
I was just wondering if they “set aside” enough money in all their deficit panic to bail out BofA.
ThingsComeUndone August 6th, 2011 at 1:44 pm
If you do nothing to fix the economy or save homeowners homes then the banks which loan to companies that sell stuff to consumers and the bank loans which went to home owners will go bad Cause and Effect I guess is not taught in business school.
Sure the Obama/GOP plan is to use a Shock Doctrine to lower American wages and that will increase exports in theory but in the Real World we are the world’s biggest consumer market if we don’t buy the rest of the world’s economy suffers.
How many Ipods are sold in low wage countries we export jobs too? Thomas Friedman argues free trade creates jobs he forgets that in the real world jobs are not being created and that low wage workers don’t buy the high tech goods he argues that America will make as we export these jobs.
Never mind that we are now exporting high tech jobs like making Ipods and cars to low wage countries.
Sure the Obama/GOP plan is to use a Shock Doctrine to lower American wages and that will increase exports in theory but in the Real World we are the world’s biggest consumer market if we don’t buy the rest of the world’s economy suffers.
How many Ipods are sold in low wage countries we export jobs too? Thomas Friedman argues free trade creates jobs he forgets that in the real world jobs are not being created and that low wage workers don’t buy the high tech goods he argues that America will make as we export these jobs.
Never mind that we are now exporting high tech jobs like making Ipods and cars to low wage countries.
New demands for refunds on soured loans from the two government-sponsored enterprises are coming “in numbers that were not expected based on historical experience,” the Charlotte, North Carolina-based bank said yesterday
Did these ass-clowns go to the same school of “data evaluation” as those economists who are “surprised” month after month at how bad the unemployment numbers are?
I don’t care if the AG wants to run for governor, but I do thank God for his actions against BofA and hope that other AG’s will follow suit against that bank and other banks and banking institutions to begin to break up the system.
God forbid that there should ever be any more bail-outs for BofA or any other bank.
Blessings
PeasantParty August 6th, 2011 at 1:48 pm
In response to ThingsComeUndone @ 8
True. If Obama knew whats was good for him he would kick out all the bankstas from his administration and immediately start a giant public works program in every state. He should also put a stop to all foreclosures because economic conditions do not allow people to fulfill their mortgage contracts and that is the fault of Washington and all its oversight boards!
They failed America. It is not Americans failure to pay back, its the decline of the country!
PeasantParty August 6th, 2011 at 1:49 pm
In response to kairossue @ 10
I’m with ya. I hope they turn their sites on JP Morgan Chase too!
PeasantParty August 6th, 2011 at 1:51 pm
I wish there was some way to investigate if the States are selling information about people on Unemployment rolls to these banks. I’ve had three friends and two relatives that were suddenly notified that their mortgages had been sold to JP Morgan Chase about 5 months after their lay-offs. They were not in default, but it seems like the banks are chasing the ambulances here.
In response to PeasantParty @ 13
OTOH, it could be GOOD news for them, if the seller of the mortgage was as FUBAR as is likely: they won’t be able to be effectively foreclosed upon.
bigbrother August 6th, 2011 at 1:56 pm
Washington and New York AGs going after BoA now to be accountable. They did not pay a ton of fees either to counties (59 in CA alone. All of the state and local governments are cash strapped so the momentum is to get all they ca. Medicaid cuts will be very painful. The deficit reduction will further depress local and state economies. Debt hawking may become a target itself.
PeasantParty August 6th, 2011 at 1:59 pm
In response to Mauimom @ 14
True! I think people should research squatters rights in their states. There are no jobs now and none on the horizon. Economic conditions warrant alternative means to keep shelter.
I have no faith in the system any more. They’ll find a way out. Either bailouts or the conservative courts. If they do actually go down they’ll figure out a way to screw as many of us as possible and then bail out on golden parachutes.
Of course, within a year or two we see many of them pop back up at other financial institutions. Because their such financial geniuses, don’t you know.
PeasantParty August 6th, 2011 at 2:02 pm
In response to bigbrother @ 15
Not sure if you caught the S&P dude on Anderson Cooper last night, but his reasons for downgrading was lack of revenue and not touching entitlements. I thought to myself, he has be chained to the NeoCons to say that in the camera. It makes no sense!
If the US is so bad off that they have to downgrade us, what does it say if the US defaults on its own social insurance program? The downgrade is purely political if you ask me.
bigbrother August 6th, 2011 at 2:03 pm
In response to kairossue @ 10
Washington Mutual, Seattle based, lost all of its stock value…the employees and stock holders lost their retirement. Boeing, the huge Seattle employer lost possibly 500,000 jobs when Airbus won the big contract for Europe this summer. The North West’s timer industry went the way of the housing industry almost shutdown and some lumber towns will be devastated.
Deed in Trust Act? Uncomfortably close to Dead in Trust Act….
bigbrother August 6th, 2011 at 2:09 pm
In response to PeasantParty @ 16
Fannie Mae and Freddie Mac have a load of foreclosed homes they have to dump on the housing market soon…further depressing existing home values.
Rents are rising rapidly as demand exceeds supppy, all these foreclosures force people into the already full rental market. Many have opted to live on the streets in RVs or campers illegally.
Where is all the excess cash that banks have?
Rents are rising rapidly as demand exceeds supppy, all these foreclosures force people into the already full rental market. Many have opted to live on the streets in RVs or campers illegally.
Where is all the excess cash that banks have?
If you call ReconTrust’s number on a notice of Trustee Sale in CA, you go directly the BofA’s foreclosure dept.
After I discovered that I was puzzled about the conflict-of-interest between the loan servicer (and possibly lender) and the trustee’s role.
Interesting.
Not to worry though, I’ve just discovered the broker of on of the largest real estate franchise chains in my area is doing deals with agents not in his brokerage with have the strong feel of fraud on the banks.
Not that I have any sympathy for the Banks. However, it’s hard to do business honestly when others are dishonest, or causing dishonesty.
flashinreno August 6th, 2011 at 2:28 pm
In response to bigbrother @ 21
They have it in Treasuries at 2.7%, borrowed it for free. This is Bernanke’s plan to rebuild their balance sheets.
In response to ThingsComeUndone @ 8
This and all other egregious acts are part of a much bigger picture….cui bono?
Tyranny can come from the left or the right. To me as a mere observer, without any defined affiliation, Treason is being committed by those we have elected and those who hide in the bushes.
This is a going on across the world as we fight for resources, and the tighter they clamp down the more we wake up.
What I don’t understand is why set fire to the house you live in, or shit in your kitchen.
This would be defined as psychotic behavior in psych 101.
And since psychopaths have very limited creative ability, make that none and in the end very bad judgment. They could blow up the world and go oops as they ride Charon’s boat across the river Styx
And since psychopaths have very limited creative ability, make that none and in the end very bad judgment. They could blow up the world and go oops as they ride Charon’s boat across the river Styx
Someone, something is working in the background. It is obvious that the captains of industry are raking it in, I just think there is an even deeper source for this. It is question physical, philosophical, and spiritual.
So..cui bono.
So..cui bono.
Just some of what this made me think of as I watch millions of lives being willfully destroyed.
thatvisionthing August 6th, 2011 at 2:35 pm
In response to ThingsComeUndone @ 8
Headline on Michael Moore a couple nights ago, in big red letters: “Who knew?” Followed by: “After years of relentless attacks on the middle class, giant media companies discover that making their customers poor is bad for business.”
Who knew?
thatvisionthing August 6th, 2011 at 2:37 pm
In response to codeine @ 20
mort gage — from the old French for death pledge
spanishinquisition August 6th, 2011 at 2:54 pm
In response to PeasantParty @ 18
That comes from the IMF’s 10 Commandments
In response to PeasantParty @ 16
Rep. Marcy Kaptur in Ohio has been telling her constituents for almost 2 years to stay in their homes- do not leave.
In response to bigbrother @ 19
I was in WA a year ago visiting relatives when there was a job fair in Silverdale for a couple of hundred jobs. Ten thousand job-seekers showed up.
In response to Mauimom @ 9
Maybe the same school as the reporters who are talking about how things are improving because there were 117,000 jobs created last month. (That’s just the first report; I’m sure it will change for the worse.)
Pragmatic Realist August 6th, 2011 at 4:57 pm
I don’t mean to change the subject too much, but talking about these numbers of foreclosures makes me think. Where have the people gone after they were evicted and their credit ruined? Is anybody doing doing an objective survey to account for these people and how many of them are literally homeless at this time? Where are they living now? Doubled up with other family? Shelters? Tents? This worries me.
In response to joeblue @ 1
Yes he does, but he has less carisma than Harry Reid, and many people in Washington are furious with them for joining other GOP AGs and suing over healthcare reform without any support from most people in the state.
ThingsComeUndone August 6th, 2011 at 7:08 pm
In response to Mauimom @ 6
Getting real numbers we can trust on what BOA owes is beyond my net skills remember the banks were all doing fine they said until the bank crisis hit then it was all unexpected no historical experience of this ever happening, nobody could have foreseen etc.
But we and Naked Capitalism did :)
Gotta go bye
But we and Naked Capitalism did :)
Gotta go bye
In response to kairossue @ 10
As lomg as he’s serious.
In response to PeasantParty @ 5
BofA did little wrong – except for buying Countrywide Mortgage in 2008. What you hear about is almost always Countrywide practices and the activities of former Countrywide employees now working for BofA.
The rescue of Countrywide by merger was one BofA walked into willingly – and one of the worst moves ever made.
In any case that is where the 2008 date comes from.
The U.S. Supreme Court has upheld the OCC's regulation (12 C.F.R. 7.4006) preempting the applicability of state mortgage lending law to operating subsidiaries of national banks.
Facts of the Case:
Under 12 U.S.C. Section 484(a), states do not have regulatory powers over national banks. In 2001 the federal Office of the Comptroller of Currency (OCC) issued federal regulation 12 C.F.R. 7.4006, which applied 12 U.S.C. Section 484(a) to state-chartered operating subsidiaries of national banks. Wachovia Mortgage was an operating subsidiary of the national bank Wachovia Bank, and was registered with the state of Michigan.
When Michigan attempted to exercise its regulatory powers over Wachovia Mortgage, Wachovia Bank sued Watters, a Michigan official, seeking a judgment that Michigan's laws on operating subsidies of national banks were superceded by 12 U.S.C Section 484(a). Michigan argued that the OCC had exceeded the authority given it by Congress by extending the definition of "national bank" to cover state-registered operating subsidiaries. Michigan also argued that the extension of federal authority over state entities like Wachovia Mortgage violates the Tenth Amendment, which reserves to states all powers not delegated to the federal government.
The District Court rejected these arguments and ruled for Wachovia, and the U.S. Court of Appeals for the Sixth Circuit affirmed. The Circuit Court found that the decision of the OCC to apply rules for national banks to their operating subsidiaries was a reasonable interpretation of Congress's intent, and therefore entitled to deference under Chevron U.S.A. v. Natural Resources Defense Council. The Sixth Circuit also held that Congress had the power to regulate operating subsidiaries of national banks under the Commerce Clause, so the Tenth Amendment did not reserve that power to the states.
Question:
1) Is the decision of the Comptroller of Currency that federal authority over national banks extends to state-chartered operating subsidiaries of national banks entitled to judicial deference under Chevron U.S.A. v. Natural Resources Defense Council?
2) Does 12 CFR 7.4006 violate the Tenth Amendment by treating a state- chartered operating subsidiary the same as a national bank for purposes of federal regulation?
Conclusion:
Unanswered and no. The Court ruled 5-3 that state-chartered operating subsidiaries of national banks are subject to regulation by the federal Office of the Comptroller of Currency and not by the states in which they are located. The opinion by Justice Ruth Bader Ginsburg held that "[...] the level of deference owed to the regulation is an academic question," because "Section 7.4006 merely clarifies and confirms what the [National Bank Act, 12 U.S.C. Section 484(a)] already conveys: A national bank has the power to engage in real estate lending through an operating subsidiary, subject to the same terms and conditions that govern the national bank itself; that power cannot be significantly impaired or impeded by state law." The Court interpreted the statute broadly, as a shield against burdensome state regulation of national banks and their subsidiaries, so the OCC's regulation preempting Michigan's regulatory laws was firmly grounded in the statute. The Court briefly and definitively disposed of Watters's Tenth Amendment argument, holding that the regulation of subsidiaries of national banks is a legitimate application of Congress's Commerce Power and therefore is not reserved to the states.
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