For the past two years, Bank of America (BoA) has “offloaded” or divested some of its operations as a way to streamline and recover losses related to its acquisition of Countrywide in 2008. In September alone, BoA sold its credit-card portfolio worth nearly $700 million to U.S. Bancorp.
The problem began in 2007 when Countrywide had loan production targets to meet and the housing market was cooling down. To speed up the loan process, they cut corners by not verifying income and eliminating checklists for underwriters. The loans were severely degraded when BoA bought Countrywide out in 2008.
BoA thought buying Countrywide would make them the nation’s premiere housing lender. Instead, the Countrywide deal became one of the worst corporate buyouts of all time.
The loans were packaged into mortgage-backed securities that had been the practice for more than 20 years. Those securities were guaranteed by the federal housing agencies Fannie Mae and Freddie Mac. Fannie and Freddie relied on BoA to validate the quality of their loans and didn’t do their own thorough investigation. The government now claims that BoA (then Countrywide) deliberately withheld information on its loans from Fannie Mae and Freddie Mac that contributed to their collapse. Federal lawsuits are being filed against BoA. (See my October 24th article: “Bank of America Sued for Fraud by U.S. Attorney”.)
This year alone, the federal government settled similar lawsuits with Citibank and Deutsche Bank and have lawsuits pending against Wells Fargo as well as BoA.
Now we are hearing that a record amount of home loans are being offloaded (transferred) from BoA to Specialized Loan Servicing (SLS) LLC. Is BoA offloading their risky, non- performing , degraded or defaulted loans to SLS?
A loan servicer collects, monitors and reports loan payments to the lender. They can also handle property taxes and insurance escrows. Typically, loan servicers like to target homeowners who are likely to be late in paying their mortgages in order to collect more fees. Servicers normally receive one to twenty-five percentage of the unpaid balance. Bank of America, Wells Fargo and JPMorgan Chase are the largest companies using loan servicers.
Homeowners who were in line for BoA’s Cash Incentive program (where the homeowner receives money to short sale the property) are losing the cash incentive. Once the loan is released to a servicer, generally all previous promises disappear.
Homeowners who have been stalled by BoA (“your loan is still in review”, “re-send paperwork”, “we never received a document”) or the BoA representative never calls back or is “unavailable” may find themselves on that list of loans being offloaded as the reason
for the stall. They have to start at square one with the new servicer.
If the homeowner had been eligible for the National Mortgage Settlement prior to being offloaded they will still be eligible unless the new servicer is not part of the program. There are only nine “sub servicers” eligible for the DOJ Settlement through BofA.
Once the homeowner gets a letter stating their loan has been transferred, the loan servicer may be very accommodating initially. Some might say this “assistance” is trying to get as much information from the homeowner as possible and may be used against them.
Whenever speaking with the lender, or the servicer, make sure you document the time and date, the person you’re speaking with and ask them to put what they’ve told you in writing and email or send to you. Keeping good records may be key to any future problems you may incur.
Colorado foreclosure procedures and laws are a real labyrinth to understand, one of the most complex in the United States. An experienced foreclosure defense attorney may need to be consulted to explain and help a homeowner through the maze and protect the homeowner’s interest.
Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.