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Why BAC "Lied and Denied" on Foreclosures

Anyone who knows me, knows I built a career mortgage services...........and that I now detest mortgage bankers.  It's not that they don't offer an invaluable service.  I cannot tell you the countless stories of homeowners who actually wept when informed of their loan's approval, brought me homemade cakes and mailed cards, even at Christmas.  Many returned to me years later when they "moved up" to a larger home or referred their family members directly to me which I felt was an enormous compliment; that they trusted their own son/daughter in my care.  It wasn't the lender they trusted.  It wasn't because we had the lowest rates in town.  It was my ability to package even the most complicated of circumstances, anticipate and document what would be required and steer them through the process with personal service and empathy they deserved.  I rarely made a sales call on a Realtor; maybe twice a year.  My flow was 95% referral and business was good; a fact I am to this day proud of.   It was an extremely rewarding job and I can honestly say, one that I loved until sometime around 2000 when service was clearly sacrificed on the alter of "crank 'em out" profits.  This story is a result of that shift in the industry.

This is about the six former Bank of America ($BAC) employees who stepped up, filed suit and admitted they "lied and denied" (my phrase) eligible homeowners sending them to Foreclosure or an in-house modification program; possibly not justifiably and one that would yield BAC more profitability.  Shocker yes I know.

Now before you point a finger at the employees, that they were merely being greedy and did this on their own without the knowledge of Management, just do a reality check.   Any Manager worth his/her salt knows exactly what their internal costs are running on a month-to-month basis; especially the largest expense: payrolls, commissions and incentives.  Hell, we ran an extremely high 36% payroll but still came in as one of the most profitable branches each year due to a focus on having a well-trained staff and purely "knowing our stuff".   In fact, nowadays part of a Manager's job to promote incentives and steer business where upper Management wants it go.....where it's most profitable.  Talk 'em into something they don't want rather than counsel on what's best.  Don't fool yourself for a moment thinking these employees acted without anyone's knowledge or came up with the ideas all on their own.  From what I saw, a great percentage of current "processors" nowadays have no right being in their position.  It's disgusting.

The suit also aledges that those not achieving their "targets" were met with discipline (poor employee reviews I imagine) and even firing.  Still think Management didn't know what was taking place?  It's easy to turn a deaf ear and just hire another (unqualified) replacement.  Job security for a job well done is a thing of the past.  Lying is rewarded because you met a quota.

Sure they knew.  Just as Countrywide Regional Managers must've chuckled talking about their infamous FOM (friends of Mozillo) loans.  I didn't even work for CFC but I knew about FOM mortgages.  Talk about such things are cocktail hour and three-Martini lunch legend within the industry.  Even if a Regional Manager was somehow in the dark (impossible) each lender has their own internal auditing system which would've questioned the F.O.M. markings as well as the prudence of approving loans which did not meet income/asset requirements or documentation. I myself conducted internal Quality Control audits at one point in my career and my Branches themselves are continually subject to random Audit each year by Corporate.  Believe me; the numbers and documentation are thoroughly double checked and if files didn't measure up, not only was the Branch Manager informed, but so was the Regional Manager.  It's the normal business process; everyone knows what is taking place.

Another great example is Branch and Regional Managers throwing their weight around with Appraisers.  Appraisers are always under enormous pressure to get the value high enough.  Somehow justify it using older comparable sales or sales in other neighborhoods (both against regulations) to get the appraised value up to the sales price/refi value or you'd lose future business.  Be blackballed.  Word would spread.  Period.  Don't use so-and-so appraisal service; they won't give you value.  So much for honesty and integrity.  Ditto with Underwriters.   Approve it or you risk a poor review and job security.  It's merely swept under the carpet..........

You have to ask yourself "why was BAC rewarding incentives for foreclosures or in-house modifications but not government-sponsored HAMP modifications"?  Why not reward accuracy and thorough documentation over volume?  For the profits baby. 

All that mattered was "crankin' em out".  Forget accuracy.  Sweep aside morals, ethics and honesty.  This is big business where profits are king and when push comes to shove, it's all good.  Just memorize the lines "not that I was aware of" and "not that I can recall" before you testify in front of Congress (wink wink).   After all, we're "too big to fail" and too big to find guilt and truly prosecute.  We might shake the confidence in the system; a system that is systemically vital to the nation.

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