I should be excited about the nearly $17 Billion Settlement agreement between Bank of America and the U.S. Department of Justice announced yesterday. I am happy for our clients here in Ohio facing foreclosure because according to initial press reports, the agreement, like previous agreements with Citibank ($7 Billion) and Chase ($13 Billion) contains language that allows Bank of America to liquidate part of its obligation under the agreement by reducing principal on mortgage loans fraudulently originated by BOA and its predecessor Countrywide in the alleged origination and securitization fraud scheme.
Anyone facing difficulty paying their Bank of America, Countrywide or America’s Wholesale Lender originated mortgage or who is in foreclosure currently, even though those companies are no longer involved as an investor or servicer of their loan should wait if possible until this new settlement agreement takes hold to see if there is an opportunity to negotiate a better outcome. If this agreement is anything like the National Mortgage Settlement it may require persistence and the assistance of a lawyer to access the benefits that the government has negotiated for you in this settlement.
My guess is that as in prior settlements DOJ left too much discretion in the hands of the Defendant in the case Bank of America to pick and choose who they will help.
But despite the good news, I have some serious concerns about these settlements. These pacts are about the origination and securitization of hundreds of thousand of fraudulent and unsuitable mortgages to American Consumers and their sale to unsuspecting investors throughout the world that nearly caused the collapse of the US economy in 2008. The illegal and possibly criminal conduct of these bad actors left millions of Americans financially insecure, caused a depression of the housing market that continues to this day and have cost investors and homeowners billions of their hard earned dollars.
What disturbs me the most is that theses settlements have been reached before a lawsuit was filed against the banks. If a complaint laying out the government’s case against Chase, and Citi and BOA had been filed before settlement, the public and future generations would have had a chance to see the unfiltered findings about the conduct of these bad actors by the Department of Justice and 5 State Attorneys General who participated in the settlement. If any of these cases had actually gone to trial, whether the government had won or lost, the adversary process would have revealed a much more realistic picture of what actually happened between 2001 and 2008 that caused the apocalyptic collapse in 2008.
For the agreements to come to fruition, a formal complaint and consent judgment entry will have to be filed but that complaint will be carefully drafted with the consent of Bank of America. Just as the complaints and agreements in the Chase and Citi cases were drafted jointly by lawyers for the DOJ and those banks. Historians, legal scholars and future market participants trying to determine the parameters of proper conduct will be left without the guidance that a contested trial, judgment and decision of a court of appeals could provide to how such market participants acted to incur such massive liability and how they should act in the future to avoid causing such pain and hardship to future consumers and investors. The New York Times addressed this risk of the Bank of America Settlement and other settlement on the eve of yesterday’s announcements.
In defending individual homeowners in foreclosure, bringing claims under state and federal consumer protection laws and civil tort claims we are taking cases to trial in Ohio every day setting standards for everything for who has standing to enforce a note and mortgage to what kind evidence a lender is required to proffer to establish a default on a mortgage or compliance with federal regulations that govern the enforcement of FHA or VA loans. These trials, decisions and appeals will provide a chronicle of the abuses of the past and a roadmap for proper conduct for mortgage lenders for the future.
We should expect no less from the United States Department of Justice and the State Attorney General Partners.