BofA Said to Target Individual States in Foreclosure Inquiry

Thursday, 28 Apr 2011 11:56 AM

 

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink

Bank of America Corp. was accused by a top official at the Iowa attorney general’s office of engaging in a divide-and-conquer strategy by undermining support for the settlement of a nationwide probe into foreclosure practices, a person familiar with the matter said.

The bank tried to get attorneys general to break away from those supporting the proposed accord, Iowa Assistant Attorney General Patrick Madigan said during a recent conference call, according to the person. A second person familiar with the settlement talks said the bank sought to sow dissent among the states, eight of which have publicly criticized the proposal’s terms. Both people asked not to be identified because the talks are private. Madigan declined to comment.

“We have held face to face negotiating sessions and our negotiations continue,” Iowa Attorney General Tom Miller, a Democrat who leads the 50-state effort, said in a statement. “We believe all the banks are negotiating in good faith.”

Madigan, who was giving an update to state officials, said the largest U.S. lender by assets was taking a “divide-and- conquer” approach in a bid to disrupt negotiations, according to the person on the call. Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, declined to comment.

State and federal agencies including the Justice Department last month submitted a 27-page settlement proposal, or term- sheet, to five mortgage servicers, including Bank of America. The document was offered to start negotiations with banks as part of the 50-state investigation.

Six-Month Probe

The six-month probe was triggered by claims of faulty foreclosure practices following the housing collapse, which state officials said may violate their laws. The people said Madigan’s comments were made on a call that took place within the past two months, after the term sheet was made public.

Since the settlement proposal was circulated in early March, at least eight Republican attorneys general have assailed its terms as overreaching. They specifically oppose a proposal that would require the servicers to pay for reducing mortgage balances owed by borrowers.

In addition to Bank of America, the other banks negotiating with state and federal officials are JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. They control more than half of the mortgage servicing market, Miller has said.

Geoff Greenwood, Miller’s spokesman, said state attorneys general would begin talks with other mortgage servicing companies after reaching a final agreement with the five banks.

“We will start looking at servicers beyond the largest five after we finish this phase of our effort,” he said.

Principal Reductions

As of last week, the states had yet to approach banks with a proposed dollar amount that would fund principal reductions for borrowers, Greenwood said at the time.

Oklahoma Attorney General Scott Pruitt, a Republican, said last week he may negotiate an alternative accord with the banks if the national settlement turns out to be “inconsistent with our conviction.”

Pruitt said in a letter to Miller last month that forcing lenders to reduce mortgage balances would take away incentives for banks to loan money and “destroy an already devastated housing market.”

Besides Oklahoma, state attorneys general who have criticized the proposal to reduce principal balances are Florida, Texas, South Carolina, Virginia, Alabama, Nebraska and Georgia.

Four of them said in a letter to Miller that principal reduction constitutes a “moral hazard.”

No Overt Requests

Lauren Kane, a spokeswoman for Georgia Attorney General Sam Olens, said in an e-mailed statement that “no one has asked” Olens to oppose the settlement proposal. One bank, which Kane declined to identify, discussed with her office a recent settlement with federal regulators over foreclosure practices, she said.

“We have been in contact with numerous industry representatives on the local and national level, who have voiced their concerns throughout the process,” said Diane Clay, a spokeswoman for Pruitt, in an e-mailed statement.

Adam Piper, a spokesman for South Carolina Attorney General Alan Wilson, said “two banking representatives shared research” with his office and “pointed out some concerns with certain provisions.” While not identifying the banks, he added that they didn’t ask Wilson to oppose a potential accord.

In their talks so far, the states agreed on some terms while failing to reach an accord on monetary payments by lenders, a person familiar with the talks said this month.

Mortgage Servicers

In March, mortgage servicers agreed with U.S. banking regulators to a series of reforms, including conducting a review of loans that went into foreclosure in 2009 and 2010 and improving procedures for modifying loans and seizing homes.

The 50 states and the Justice Department seek to set requirements for how banks service loans and conduct home foreclosures.

Any state agreement with banks on principal reductions will depend on the size of the writedowns, the incentives for the servicers built into the settlement and other details which continue to be sorted out, said the person, who declined to be identified because the talks are confidential.

Another person familiar with the talks said last week that a final agreement could take as long as four months to reach.

Pruitt said his plan could be a model for other states.

On April 26, Jennifer Meale, a spokeswoman for Florida Attorney General Pam Bondi, said Bondi “looks forward to reviewing” Oklahoma’s plan. Yesterday, Meale said Bondi hasn’t been urged by the banks to oppose the term sheet.

“We have had general discussions with banks about how the matter might be resolved,” Meale said in an e-mailed statement.

© Copyright 2014 Bloomberg News. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved