Now, another new lawsuit, featuring a separate whistle-blower, contains additional remarkable revelations – and may shed light on Bank of America’s strategy in getting out from under the mountain of legal exposure and costs in which it now finds itself. Simply put, the bank seeks to pocket quick cash and evade practices set forth in major settlements – by cashing out of the subprime mortgage servicing business. The result would be to leave struggling homeowners back at square one, with even fewer protections to avoid foreclosure.
First, some background. Over the past year, non-bank servicers like Nationstar and Ocwen have been buying up servicing rights to millions of mortgages, gradually positioning themselves to become the biggest companies in the space. These non-bank servicers, which process monthly payments and deal with foreclosures but do not originate loans, have an asset not available to their big bank colleagues: They haven’t yet been officially caught scamming customers. Therefore, they are not a party to the various servicer settlements brought by state and federal regulators, and they need not submit to those settlement guidelines. This includes rules like establishing a single point of contact for borrowers, stopping foreclosure operations when a modification is in process (ending what is known as “dual track”) and facilitating proper payment processing.
All of this has come to a head in a class-action lawsuit filed by Leonard Law Office in Massachusetts against Green Tree Servicing, a non-bank servicer based in St. Paul, Minn. As detailed by an insider at Bank of America in a packet of documents, in January 2013, BofA sold servicing rights to 650,000 mortgages (worth $93 billion) to the parent company for Green Tree.
And there is more from Leonard Law Office, LLP:
Soon after Leonard Law Office LLP filed a class action lawsuit against Green Tree Servicing for allegedly violating the Telephone Consumer Protection Act, an anonymous insider from Bank of American (BAC) mailed an untraceable packet of information in a plain manila envelope. A .pdf of the file is here.
The insider wrote:
“In order to sell the mortgage servicing rights (MSRs) for half of the 800k loans in the BAC book, they had to include approx. 1.5MM current loans. Successor servicers can then solicit HARP refis and get incentive from the govt.
Not many reputable servicers want the bad loans, so BAC is selling to Nationstar, Greentree and M&T. These entities are NOT regulated by the OCC and do not have to abide by the OCC consent order which outlines strict guidelines on dual tracking (can’t foreclose while a modification is in process), payment processing and single point of contact (SOPC) to assist the borrower. This also includes special treatment of borrowers impacted by the hurricane Sandy. It may mean that any modification currently in process with BAC will not be recognized and the borrower will proceed into foreclosure.
These entities haven’t been under any scrutiny regarding TCPA and other consumer protection acts. They do not screen prior to making outbound calls. No one has cared, but now that numerous “good” borrowers are being sent their way, the right people are finally taking notice.
Tony Meola joined BAC from Saxon mortgage early in 2011. Research the execs at Nationstar – many are buddies of Tony’s. Nationstar did not BAC due diligence for subservicing, but the connections allowed them to be approved (subservicing – you pay someone to service the loans, but keep the MSR).
Brian Moynihan, Ron Sturzeneggar and Tony Meola are well aware of the horrible reputation of these sericers. Brian received an email from client/friend who just learned his mortgage had been transferred. He was not pleased and shared a link to a consumer affairs website tracking Nationstar complaints. Brian did nothing buy forward to Ron, who did the same.
The deal was signed in January 2013. They should have thought of that prior to selling the MSRs to these entities; however, the were primarily concerned with getting the bad loans off their books, not with customer experience.
Under Tony’s leadership, BAC has failed at processing default loans. Ron is a dealmaker, not an operations guy. He was brought in to sell stuff. Any they both receive large bonuses.”