December 21. 2013
Secret Inside BofA Office of CEO Stymied Needy Homeowners
Isabel Santamaria thought she finally caught a break in her effort to save her Florida home from foreclosure after nine frustrating months: She reached Bank of America Corp.’s Office of the CEO and President.
What the mother of two autistic children didn’t know is that her case would find its way to contractors, including Urban Lending Solutions in Broomfield, Colorado, far from the bank’s headquarters in Charlotte, North Carolina. Bank of America hired the firm founded by Chuck Sanders, a former Pittsburgh Steelers running back, to clear a backlog of complaints about a federal program designed to prevent foreclosures.
“It felt like a big deal, reaching the CEO’s office,” Santamaria, 43, said of having her June 2010 call escalated to what she was told was the bank’s top level. “It only happened because I complained to my congressman, the attorney general, television stations. They only put you there if you make a big stink, but once you’re there, they still don’t help you.”
Bank of America, led by Chief Executive Officer Brian T. Moynihan, faced more than 15,000 complaints in 2010 from its role in the government’s Home Affordable Modification Program. Urban Lending, one of the vendors brought in to handle grievances from lawmakers and regulators on behalf of borrowers, also operated a mail-processing center for HAMP documents.
Instead of helping homeowners as promised under agreements with the U.S. Treasury Department, Bank of America stalled them with repeated requests for paperwork and incorrect income calculations, according to nine former Urban Lending employees. Some borrowers were sent into foreclosure or pricier loan modifications padded with fees resulting from the delays, according to the people, all but two of whom asked to remain anonymous because they signed confidentiality agreements.
HAMP was the centerpiece of President Barack Obama’s attempt to prevent foreclosures by lowering distressed borrowers’ mortgage payments. Under the program, homeowners are given trial modifications to prove they can make reduced payments before the changes become permanent.
The accounts of the former employees help explain why Obama’s plan fell far short of the 3 million averted foreclosures targeted in 2009. Relying on the same industry that sold shoddy mortgages during the housing bubble and improperly sped foreclosures afterward, HAMP resulted in still-active modifications for 905,663 homeowners as of the end of August, or 13 percent of the 6.9 million people who applied.
Bank of America stands out in a program that lawmakers and former Federal Deposit Insurance Corp. Chairman Sheila Bair have called a failure, leaving many homeowners worse off. The second-largest U.S. lender canceled more trial modifications than any mortgage firm and sent the highest percentage of rejected customers into foreclosure, Treasury data show.
To help run its modification program, Bank of America relied on managers who had worked at Countrywide Financial Corp., the subprime lender it took over in 2008. Those executives created and enforced quotas for resolving complaints, according to the former employees. Among them was Rebecca Mairone, found liable by a federal jury in October for defrauding government-backed housing companies Fannie Mae and Freddie Mac while working at Countrywide.
Urban Lending staff, struggling to meet those quotas, resorted to falsifying records and improperly purging complaints, the people said. They sent letters containing inaccurate statements on Office of the CEO and President stationery to lawmakers and U.S. agency officials who sought assistance on behalf of borrowers, the former employees said.
Tens of thousands of HAMP modifications were improperly denied by Bank of America and Urban Lending since April 2009, according to a July complaint filed by homeowners against the two companies in federal court in Colorado.
“Everyone knew that we weren’t helping people,” said Erik Schnackenberg, a customer-service manager who left Urban Lending in 2011 and now runs a yoga studio in Longmont, Colorado. “They were giving us all the pressure and none of the power to change anything. It was this absurd, self-contained ecosystem of worthlessness.”
Schnackenberg and other former employees, who spent from four months to three years at Urban Lending as customer-service representatives and auditors, said they spoke when contacted by Bloomberg News because they’re distressed by what they saw.
Bank of America didn’t intend to mislead or stall customers or misrepresent facts to lawmakers, Ron Sturzenegger, head of the lender’s Legacy Assets Servicing unit, said in an hour-long interview. Changing HAMP guidelines and an initial influx of overdue borrowers made the program difficult to implement, and the bank has made improvements since 2009, he said.
“The only intent that we’ve ever had is to help these customers,” said Sturzenegger, 53. “If we could get more people into HAMP, we’d do more HAMPs.”
Bank of America authorized Urban Lending to refer to itself as the Office of the CEO and President in letters and telephone conversations to provide a seamless experience for homeowners who complained directly to Moynihan, Sturzenegger said.
“The way we view Urban and other vendors like Urban is as an extension of Bank of America,” he said.
Glenn Stevens, general counsel and executive vice president of human resources at Urban Lending, denied that the firm engaged in any wrongdoing and declined to respond to questions, saying he wouldn’t address matters tied to pending litigation.