Why is Bank of America suspending foreclosures?

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tomadkins's picture
tomadkins
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Posts: 32
Why is Bank of America suspending foreclosures?

General Disclaimer:

I am not a shareholder or BOA.  I do not bank with BOA.

Question:  I need some of the erudite members of this forum to illuminate me on the question:  Why is BOA suspending foreclosures?

I have a hunch...it may be totally off base.  Goes like this:

It was rampant in the mortgage community...that is...closing loans.  Whatever you had to do in order for the mortgage to be processed...DO IT.  In that regard, BOA was following the industrial mantra.  However, because of their size, their may be more to it. 

How does BOA make money on mortgages?  The first way that comes to mind is their origination fees.  Just get the paperwork in the process production line...make sure the appraisal company complies with the originators intentions (you can read that:  do this "right" and I'll give you more referrals on more loans in process) and close the loan.

The second way that BOA makes money is by collateralized debt obligations (CDO's) utilizing these mortgage loans as the asset-backed security.   Mainly, they (BOA?) gather a bunch of these mortgage applications/loans and bundle them into a significant amount of loan proceeds (i.e. maybe $50 Million US) and then sell this to a Wall Street institution.  Wall Street wants repeat business too...so the bank has the impetus to repeat this action...and given their footprint in the USA, BOA has a pretty good market share...thus:  they are able to continue this "printing press".  The problem is...they "know" that these products (the loans/the CDO's) are not as safe as the consuming customer (i.e. the public at large...and the financial advisors that the public trusts with their 401K's and pension fund managers and on and on) expects...nevertheless...since BOA is involved...and, btw, the ratings service (you know, Moodys and others) are all stamping these huge products as meeting industry guidelines pertaining to financial stewardship...meaning:  the thing is a safe as being in yo mama's arms...

Yeah...right!

Turns out, BOA has the fiduciary responsiblity to the public at large...to conduct itself a little differently.  But hey, this has become (at the time) industry standard operations...so the ruse continued.

 

However, after a few years of this rich diet of money flows...the cooler heads @ BOA prevailed upon whomever and BOA then started betting AGAINST the solvency of these loans that BOA processed.

Think of it:  on the one hand, BOA has packaged these loans with all the appropriate ribbons and bows and has had them stamped by the rating agency and has orchestrated a ready,willing, able outlet (Wall Street)...and everything is sweet as roses.  But...

Yeah, the BUT:  these loans have a re-set feature. 

As long as the subject property keeps appreciating in perceived value, AND as long as the borrower can remain employed, AND as long as the borrower can re-finance the property...the snowball increases in size.

But BOA, being at the center of this universe, knows that there is significant wobble...and at any time...this thing can come unglued.

They also know that because of their involvement, their size, their influence...they may be culpable...

So what do they do?

They place bets against the long term solvency of the very loans that BOA itself brought into existence.

In short:  they sold a lie and they know it.

That is the third way they made money on this whole mortgage mess.  When the mortgage mess wheels came off...BOA cashed in huge because they "knew" it couldn't last.

On Monday of the week, they professed complete fidelity to the tenants of the system.  By Friday, they had thrown in the towel and decided to double-dip.

But the real kicker is:  BAILOUTS.

Yup, got that right.  Being a ToBigToFail (TBTF), BOA was protected by the syndicate (i.e. the FED) and received protection funds to sustain their appearance of solvency.

So, the beg the question:  why did they stop the foreclosures?

My sense is:  they've been part of the whole mess from just about the start, they are dirty in just about any arena of mortgage activity, they know it, now you know it, and the reason they've stopped the foreclosures:  there will (probably) be a class action suit against BOA for their complicity in the mortgage debacle.  By stopping, now, they want to side-step OR try to buy some time from the FED (read this:  another Bailout) so that they don't have to resume their foreclosure process.

OK, I've been on a tear with this.  Typing as fast as I can.  But I honestly don't know if this is anywhere near the truth or not.

Please, weigh in on this and help me understand this situation.

Regards,

Tom

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
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Posts: 1982
Re: Why is Bank of America suspending foreclosures?

There are two threads on this in the Current News & Events fourm.

TNdancer's picture
TNdancer
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Posts: 127
Re: Why is Bank of America suspending foreclosures?

They have stopped because they can't prove they are the ACTUAL holder of the mortgage anymore.  Once they packaged them up and sold them off to investors, they may have retained the servicing rights, but NOT the actual mortgage.....therefore, legally, they can't forclose since they no longer have the orginal note the debtor signed.

And there are a whole bunch of other banks in the same boat.  

Once the folks that are underwater on their houses figure this out, look for wholesale defaults.

And even if you aren't underwater, how can you be sure you've ever REALLY paid off your mortage ?  Seems to me that if 100 investors own a piece of it, all 100 would have to sign a release when you finally paid it off, or there would always be the possibility that down the road, one of them could come back with a claim.  No wonder title insurance companies are jumping ship !

AND if you bought a home that was foreclosed on from a bank, do you REALLY own it ?  What happens when the former own shows up with lawyer in tow, demanding his house back ( or compensation ) ?

And  WHERE exactly was Congress during this mess ?  Glass-Stegal Act was passing during the 30's specifically to keep banks OUT of the securities business.....why was it repealed ?

If it weren't for the fact this will probably take the whole financial system down along with it, this would be one heck of a comedy.

"Another fine mess you've gotten us into, Stan" said Ollie.

Broadspectrum's picture
Broadspectrum
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Joined: Mar 14 2009
Posts: 88
Re: Why is Bank of America suspending foreclosures?

Right, it's in regards to all the fraud that went on with the mortgage documents.  As soon as Obama signs HR 3808 B of A will resume their usual business.  Other persons have asked me the same question.  B of A is not doing this out of the goodness of its heart (most people would say it doesn't even have a heart...because it's not a human being/person...or is it?).  Check out this article on Ameriquest.   

HOW A GANG OF PREDATORY LENDERS FLEECED AMERICA, By Michael W. Hudson

Monday, 11 October 2010

http://carolynbaker.net/content/view/1795/1/

"In the first years of the twenty-first century, Ameriquest Mortgage unleashed an army of salespeople on America. They numbered in the thousands. They were young, hungry, and relentless in their drive to sell loans and earn big commissions. One Ameriquest manager summed things up in an e-mail to his sales force: "We are all here to make as much fucking money as possible. Bottom line. Nothing else matters." Home owners like Carolyn Pittman were caught up in Ameriquest's push to become the nation's biggest subprime lender".

Broadspectrum

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2219
Re: Why is Bank of America suspending foreclosures?
Broadspectrum wrote:

As soon as Obama signs HR 3808 B of A will resume their usual business.  

Obama has vetoed/sent back unsigned HR 3808.  White House Communications Director Dan Pfeiffer had this to say:

http://www.businessinsider.com/heres-why-obama-is-vetoing-hr-3808-2010-10

"The authors of this bill no doubt had the best intentions in mind..."
 
A cynical man would've spit his coffee all over the computer monitor when reading that.  Lucky for me I was just drinking water...

Viva -- Sager

Broadspectrum's picture
Broadspectrum
Status: Bronze Member (Offline)
Joined: Mar 14 2009
Posts: 88
Re: Why is Bank of America suspending foreclosures?

Sager,

I am glad the bill was vetoed and that you were only drinking water.  It will be interesting to see how long B of A will continue the suspension.

Broadspectrum

Broadspectrum's picture
Broadspectrum
Status: Bronze Member (Offline)
Joined: Mar 14 2009
Posts: 88
Re: Ellen Brown Explains Foreclosuregate

Here's what Ellen Brown wrote in regards to the veto and the problem.

http://www.truth-out.org/foreclosuregate63953

"Three large mortgage issuers - JPMorgan Chase, Bank of America and GMAC - have voluntarily suspended thousands of foreclosures, and a number of calls have been made for investigations".

Near the bottom, there's this...

Financial analyst Marshall Auerback suggests calling a bank holiday. He writes:

Most major banks are insolvent and cannot (and should not) be saved. The best approach is something like a banking holiday for the largest 19 banks and shadow banks in which institutions are closed for a relatively brief period. Supervisors move in to assess problems. It is essential that all big banks be examined during the "holiday" to uncover claims on one another. It is highly likely that supervisors will find that several trillions of dollars of bad assets will turn out to be claims big financial institutions have on one another (that is exactly what was found when AIG was examined - which is why the government bail-out of AIG led to side payments to the big banks and shadow banks).... By taking over and resolving the biggest 19 banks and netting claims, the collateral damage in the form of losses for other banks and shadow banks will be relatively small.

Broadspectrum

JustinChase's picture
JustinChase
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Joined: Aug 31 2010
Posts: 18
Re: Why is Bank of America suspending foreclosures?

actually (to be very brief) they are suspending foreclosures because they "discovered" flaws in their foreclosure processing.

In short, in order to foreclose, in 23 states, you must sign an affadivit stating you have personal knowledge of the facts contained in the filing.  The people signing these affadavits were not actually personally verifying the facts, but were instead relying on their subordinates to have verified the facts.

someone wondered how one person could sign (and verify) over 10,000 documents per month, and then it hit the news.

They originally put a halt on foreclosures in those 23 states while they reviewied their procedures.  I can surmise that they discovered more errors in their process, and decided to halt them in all states.  I actually think they hope this will buy them some goodwill (see, we're trying to do the right thing here) with the states attorney's general and in the press.

that's a very brief explanation.

HR3808 would not have acutally allowed them to commit foreclosure fraud or any of the other claims I've seen in the news, or read in the forums.

For more on that, please see these threads where I give MUCH more details about the HR3808 claims

http://www.peakprosperity.com/forum/lobbyrats-3-americans-0-write-wrong/...

http://www.peakprosperity.com/forum/hr-3808-obama-prepares-legalize-fore...

Lakhota's picture
Lakhota
Status: Bronze Member (Offline)
Joined: May 6 2009
Posts: 44
Re: Why is Bank of America suspending foreclosures?

Hau kola Mr Justin,

Pilamaya yelo, thank you, for posting this clarifying information. 

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