In the first of its kind trial‚ a jury found Bank of America – one of the largest banks in the country – liable for the defective mortgages sold by subsidiary Countrywide in the lead-up to the financial crisis.
The decision‚ widely hailed as a big victory for the U.S. Justice Department in its efforts to hold big banks accountable for the collapse of the housing market‚ also pinned a great deal of the responsibility on top Countrywide manager Rebecca Mairone. The primary allegation is that the company purposely overlooked the quality of the loans it churned out‚ instead placing a premium value on the quantity. Those loans were then bundled and resold to unsuspecting investors‚ including the government-backed Fannie Mae and Freddie Mac.
Our foreclosure lawyers in Los Angeles understand that the verdict preludes what is expected to be a multibillion dollar penalty against the financial giant. The ruling came just prior to news of a $13 billion settlement the government reportedly reached with JPMorgan Chase over similar allegations.
The big question now is whether any of that money will be used to provide relief to the millions of homeowners who were affected‚ many of whom are still struggling to remain in their homes. A fair amount of those homes are underwater‚ valued at far more than what they are worth. Banks gave out loans to people they knew could never have reasonably afforded them Then those same entities hid the risk factor from investors when the loans were bundled and resold.
So certainly the investors deserve some cut of the pie. But so do homeowners.
The $25 billion national mortgage settlement‚ reached last year‚ has not had quite the impact that many had hoped. A recent follow-up report credited banks with $4.1 billion in principal reductions on primary mortgages‚ $2.2 billion in principal reductions for second mortgages‚ about $5.4 billion in short sales in lieu of foreclosures‚ and $2.6 billion in loan modifications focused on refinancing for lower interest rates.
Of course‚ that’s all self-reported‚ and many homeowners have said they needed to fight tooth-and-nail to get even basic relief.
Meanwhile‚ the top prosecutor in New York State has decided to sue Wells Fargo & Co. over its alleged failure to comply with customer service reforms that were mandated under that $25 billion settlement agreement. It hadn’t all been about the dollar amount. Banks were supposed to make it easier for people to file for a loan modification‚ provide a single point of contact and improve billing accuracy. Wells Fargo reportedly didn’t do that. Neither did Bank of America‚ the attorney general said‚ although the firm managed to ward off a lawsuit by changing its internal procedures.
Still‚ third-party debt buyers snapped up many of those outstanding mortgages‚ and they are subject to the same rules as the banks who agreed to the settlement. So that means many homeowners are still having a tough time obtaining timely‚ meaningful relief in their efforts to avoid foreclosure.
So while some media pundits have decried the latest JPMorgan Chase settlement and the Bank of America verdict as something of a “shakedown” or a “witch hunt‚” let’s not forget the true victims in all of this.
Court hearings to determine how much Bank of America should pay for Countrywide’s wrongdoings will begin Dec. 5. With regard to JPMorgan’s settlement‚ the exact terms of the deal have yet to be announced.
What we do know is that those facing foreclosure in California are still going to need solid legal representation. We’re here to help.
If you are facing foreclosure in Los Angeles‚ contact Cal West Law to schedule your free consultation. Call (800) 568-0707.
Everything you need to know about JPMorgan’s $13 billion settlement‚ Oct. 21‚ 2013‚ By Neil Irwin‚ The Washington Post