Hat tip to SM for sending this along, from Yahoo.com:
It’s no secret that Bank of America wants to put its mortgage-related woes behind it. But it appears that a key $8.5 billion settlement with large investors is playing a role in pushing many more people into foreclosures.
The number of homes across the country that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, the foreclosure listing firm RealtyTrac reported last week. It was the largest monthly increase since August 2007, right after the housing bubble had burst.
Now a preliminary analysis reveals the largest escalation of foreclosures came from Bank of America. Just in California, default notices sent by Bank of America soared 96 percent in August from the previous month.
The dramatic rise is particularly evident in certain California towns and cities. For instance, notices surged 95 percent in Fresno and 76 percent in Sacramento.
Bank of America says that taking action on its foreclosure pipeline will set the stage for a housing market recovery. However, consumer advocates say Bank of America and the other lenders are ramping up foreclosures without cleaning up shoddy paperwork practices, which led to a moratorium in foreclosures last October.
“Bank of America has a ticking time bomb in its books and it needs to show investors that it is moving,” said Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates.
“‘Does that mean it has improved its practices?’ No. But Bank of America is in a desperate place,” said Rheingold.
On June 29, the Charlotte, N.C. bank struck an $8.5 billion settlement with a group of large investors– including Pimco, the New York Fed and Blackrock– who claimed the bank had sold them poor quality investments based on faulty mortgages. The settlement is still subject to court approval; a decision is expected in November. Several other investors and homeowners have also filed objections with the court to block the settlement.
Bank of America spokesman Richard Simon said the bank’s increased foreclosure actions had nothing to do with the settlement. Instead it stems mainly from a return to more timely filings on new defaults. He also noted that the bank has improved quality controls and was moving homes into foreclosure “only after all other options with homeowners have been exhausted.”
Clearing the backlog of foreclosures and defaulted loans is a key part of the terms of the settlement. Bank of America has to reduce the number of risky mortgage loans and find third-party companies that can help speed up the process. This includes helping homeowners modify loans or herding defaulted loans into foreclosure sales.
The bank’s actions to start clearing the backlog started from the date the settlement was signed, said Scott Humphries, a partner at law firm Gibbs & Bruns, which represented investors in the settlement. “It does not have to wait for court approval,” he said.
Bank of America is hopeful that the settlement will be approved, as it’s a key part of the process to enable management to focus on other issues.
The bank’s stock has been decimated this year — falling more than 50 percent since January. That’s because Bank of America has been hit by a spate of lawsuits from large investors, the government and corporations who say the bank should either buy back the billions of dollars of faulty mortgages or pay damages. Most of the mortgages were written by Countrywide Financial Corp., the country’s largest mortgage lender which Bank of America bought in 2008.
On the national level, there wasn’t any immediate reason, other than the Bank of America settlement, to explain the spike of defaults in such places as Tallahassee, Fla., where an additional 81 percent of homeowners received default notices. In Carson City, Nev., default notices rose by 185 percent.
Consumer advocates say there aren’t any signs that the shoddy paperwork practices have been cleaned up even as foreclosures are being sped up.
“Bank of America will do the exact same thing now, except faster,” said Don Barrett, partner at the Barrett Law Group, which is representing homeowners who seek to block the settlement. Barrett is a former tobacco lawyer who represented cases for attorneys general of several states against the tobacco industry.
Is BofA continuing to surge? Here are the monthly counts of NODs in SD County and statewide (September’s count is month-to-date):
|SD BofA NODs
|CA BofA NODs