BofA Says Added Foreclosure Costs `Grossly Distorted,' Stands by Policies
Bank of America Corp.’s head of home lending said outside estimates of costs stemming from delays in foreclosures are “grossly distorted.”
Reviews of foreclosures will delay fewer than 30,000 sales, said Barbara Desoer, president of Bank of America’s home lending and insurance unit. Desoer didn’t specify which estimates she believes are imprecise. The Charlotte, North Carolina-based lender will rework 102,000 pending foreclosure affidavits in 23 states and stands by the accuracy of its procedures, she said.
Bank of America shares declined about 9 percent this week, reaching their lowest level in more than a year, amid growing scrutiny of foreclosure practices and speculation that investors may force lenders to buy back faulty loans. The lender, the biggest in the U.S. by assets, said Oct. 8 it would stop foreclosure sales nationally pending a review of its practices over the next few weeks.
Federal banking regulators and a group assembled by attorneys general from all 50 states are investigating whether employees of lenders including Ally Financial Inc., JPMorgan Chase & Co. and Bank of America have falsified documents used in foreclosure proceedings.
“We believe that our assessment shows the basis for past foreclosure decisions is accurate,” Desoer said in an interview today. “The type of borrower in that 30,000 is somebody who hasn’t made a payment in an extended period of time.”
The bank has hired independent companies to study its loan documents and processes, Desoer said, declining to elaborate. Because of the bank’s earnings announcement scheduled for Oct. 19, she said she couldn’t provide more details on costs from foreclosure delays.
“We are pulling 102,000 foreclosure affidavits that we will rework and get reinserted so that the judgments can take place,” she said. “We wanted to give all of our customers confidence that they are being treated fairly.”
Delays tied to the probes may cost U.S. lenders $2 billion for every month, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia. He estimated the cost of extending foreclosures is $1,000 monthly for each property in the pipeline.
About 195,000 borrowers at Bank of America haven’t made a mortgage payment in more than two years, Desoer said, which she attributed to prolonged economic difficulties and high unemployment. More than 56,000 of those borrowers have already vacated their homes pending final foreclosure action, she said.
Bank of America, which handles billing and collection for 1.4 million home loans, is also confident that industry practices in transferring home loans to securitization trusts are valid, Desoer said, citing comments from the bank’s outside law firms and the American Securitization Forum, whose members include banks, investors and ratings firms. Reports of defective documents have raised concerns that courts will be jammed with suits contesting property rights because procedural mistakes cloud titles establishing ownership.
“I’m not sure there are any lost notes,” she said, referring to the promissory notes that entitle the holder to seek repayment of a mortgage. Attorneys seeking to help borrowers avoid foreclosure have said banks have violated federal and state laws by recreating notes when they can’t locate the original documents.
Bank of America declined 69 cents, or 5.5 percent, to $11.91 at 3:11 p.m. in New York Stock Exchange composite trading.
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