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Quelle Surprise! Bank of America Accused of Blocking Arizona AG Investigation

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One thing NC readers may have become attuned to, either via personal experience or some of the discussions we have had here, is how often a considerable portion of the value of a deal lies in releases (waivers of liability) or other provisions that might not seem all that important to the party signing away its rights.

Bloomberg reports that the state of Arizona has told the court that Bank of American is undermining the state’s investigation of its loan modification practices. The probe comes out of a 2010 lawsuit which alleged that Countrywide misled customers about its loan modification policies. So what did Bank of America do? It apparently gave mortgage mods to some (many?) of the people who had complained to state officials and had them sign an agreement not to say anything about the deal or disparage Bank of America. Per Bloomberg:

One 2011 accord involving a borrower facing foreclosure who defaulted on a $253,142 mortgage included a $5,000 payment, plus $7,500 for legal fees, and the defaulted payments were waived and the loan was modified to a 40-year term with a 2 percent interest rate, court documents show….

The borrower “will remove and delete any online statements regarding this dispute, including, without limitation, postings on Facebook, Twitter and similar websites,” and not make any statements “that defame, disparage or in any way criticize” the bank’s reputation, practices or conduct, according to documents filed in state court in Phoenix….

“These agreements have completely silenced even the most communicative consumers,” Matthews said in the filing. “The settlement agreement purposefully makes it impossible, legally and practically, for a consumer signing it to come forward, voluntarily and promptly, to provide evidence in this case.”

She asked a state judge to order Bank of America to notify borrowers who signed the agreements that they don’t have to adhere to the confidentiality and non-disparagement provisions.

This is all very entertaining. Remember, first, that it is not uncommon for parties to put provisions in contracts that are not enforceable in the hope they can snooker the unsophisticated into thinking they have to respect them. For instance, some landlords will try putting a “no roommates” clause in their rental contracts when New York city rent regulations allow tenants to take roommates. In addition, many confidentiality agreements contemplate that the parties might be compelled by judicial order to break the agreement; they contain clauses requiring the party subpoenaed to inform the other party to give them the chance to try to block the order. But there was apparently no language like that in these provisions that would clue presumably unsophisticated borrowers into the idea that these agreements could be superceded by court action.

Bank of America has amusingly adopted contradictory responses to being caught out. On the one hand, its formal response argues that these gag orders are “plain vanilla” that it uses “on an every day basis to resolve disputes”. In other words, this sort of language is perfectly routine and BofA use it all the time. Yet it ALSO said it uses it on a “limited” basis to settle disagreements and forestall costly lawsuits. Similarly, Bloomberg reports:

“We look at each situation on a case-by-case basis and decide what to do based on the specific situation,” Shirley Norton, a Bank of America spokeswoman, said in an e-mail.

Huh? First, they can’t have it both ways. Either they use this provision normally in mortgage mods or not. They seem to be muddying the water by bringing in ALL disputes the bank enters into. Yes, in a bank as big as Bank of America, I’d suspect they are just about never creating new legal language for a customer disagreement, so by definition any language could be characterized as “routine”. But the germane question is not how often it is used across the bank, but whether this is standard practice in mortgage mods. If not, it would confirm the Arizona AG’s allegations regarding intent.

In addition, how would this sort of gag order help BofA avoid costly lawsuits? Only if borrowers broadcast the info: “Heh, BofA told me incorrectly I had to default to get a HAMP mod, and they started to foreclose when they didn’t get a permanent mod, and I was talking to the AG’s office and they were super interested. And funny, BofA changed their tune and gave me really nice mod like X.” And that still isn’t a lawsuit (readers are welcome to tell me what scenario IN THIS CASE they think I’ve missed).

The point here is the AG has a point: despite BofA’s pleading, it looks like it was doing what it could (which may not have been all that much, given how badly organized most servicers are) to make its little bad servicing problem go away before the AG got to unhappy borrowers. If I were the judge, I’d have a lot of trouble with BofA’s wounded tone. Most of them are smart enough to see through pretenses of wounded innocence.

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24 comments

  1. psychohistorian

    I will believe we are getting somewhere when a judge puts a BofA employee (a sacrificial lamb would even pacify me at this point) in JAIL!!!!!

    Until we reach the tipping point of jail happening for more of this bribery and corruption, it will continue to be the operative strategy. Watching that happen in what looks to be at best slow motion is painful.

    Go get them judicial world!
    Return us to rule of law, please.

  2. Fraud Guy

    I have a BofA HAMP mod (different state). There is no such gag order in the six page doc. Not too difficult to read, either, as it is in about 12point type.

  3. rjs

    why does this remind me of their attempt to buy up all the domain names that disparaged BofA?

    FT.com / Banks – Hundreds of anti-BofA websites registered:

    “Hundreds of website addresses that disparage Bank of America executives and board members have been registered in recent days in an apparent effort to protect the bank and its senior leaders, according to internet companies who track the buying and selling of such domain names.

    More than 300 addresses that disparage BofA officials using variations on “sucks” and “blows”, including BrianMoynihanBlows.com and BrianMoynihanSucks.com, referring to the bank’s chief executive, were registered on December 17.”

    http://www.ft.com/cms/s/0/3993f69e-0e2b-11e0-86e9-00144feabdc0.html#axzz1CJwBO0cQ

    1. LAS

      So they KNOW they suck and blow do they?! To be sure they’ve foreseen quite a lot else then. Hoocouldaknowd indeed.

      It’s just a matter of what they feel properly requires intervention.

    2. Praedor

      I just bought bankofamerica-r-criminals.com and .org. There is no way for them to buy up all the possible iterations of calling them what they are.

    1. enouf

      To follow up;

      My last comment reminds me of the recent article here at NC concerning “Economists” (hahaha .. like it’s a science or something; even remotely based in reality.. hahaha).

      IOW; A Psychopath’s indoctrination to a sort of Religious Dogma (Humanim); Why on earth would any rational being think they’d (Economists) would behave in any other way? Haven’t they shown their “belief” system–Super-Nova-ly clearly?

      I’d call it a “cult”, but the corruption of Mankind’s heart is so deep and widespread, it’s beyond pandemic–it’s an axiom of truth … whoops, can’t have any of that now, can we? ;-)

      Love

  4. Fraud Guy- Also

    As a general matter, there is no established legal principle that confidentiality agreements are not enforceable against citizens making disclosures to the government. This seems hard to believe, but it is true. You can be sued for breaking a confidentiality agreement by telling the government about your employer’s illegal activities.

    How does this happen in practice? For example, you see your employer evading taxes. If you try to tell the IRS about it, they will respond by telling you that they typically only investigate situations where people come to them with actual documents showing tax evasion practices. So now you go back to work and make copies of the company’s internal financial statements and turn them over to the IRS. Eventually, the company finds out you took the documents, which were subject to a confidentiality agreement between you and the company, and sues you for violation of that agreement. This scenario is happening increasingly frequently in the whistleblower space, as companies recognize that lawsuits like these are an excellent chill on disclosure of their wrong-doing to authorities.

      1. enouf

        As a follow up;

        All Banksters and their minions are the true “Welfare Queens” ; None will take Responsibility for their actions, None will admit they only subsist through taxpayer funding, ..and most noteworthy; None want to be held accountable for their Fraudulent and Felonious actions!

        Love

    1. Walter Wit Man

      But a criminal subpoena is one sure way to get around this, no?

      If the AG subpoenas these people there is no problem.

      Plus, why not use this as further evidence of criminal intent?

      As in . . . . isn’t “impeding and investigation” a crime? Not to mention further evidence of the previous conspiracy because it involves the cover up. Why is the AG asking the court for a declaratory judgment rather than pursuing criminal charges against the people that came up with this scheme to cover up the wrongdoing?

      Shoot, the Arizona AG should be looking to indict the SEC staff for destroying records. If I destroyed records that are clearly evidence in crimes that are being investigated, like the SEC and CIA have done recently, wouldn’t I be charged with a crime?

  5. brian

    since Obama is accepting his renomination in the BOA arena in Charlotte is BOA buying TV advertising time?

    seems appropriate
    this show brought to you by….

    1. LeonovaBalletRusse

      Occupy Charlotte 2012: Bust Oreobama-BAC and the Confederate Fraud Fix.

      BILL BLACK/YVES SMITH 2012: JUSTICE NOW OR NEVER
      Chris Hedges: Secretary of State

  6. Lambert Strether

    So the price for a mod is silence? That makes HAMP another bailout, since the value of legalized witness tampering in a criminal case is far greater than the dollar value of the mod itself.

    These people are as twisty as corkscrews.

  7. steelhead23

    Dear Ms Smith, Once again you have completely mischaracterized the intent of BAC and unnecessarily and vindictively implied that we have done something wrong. I assure you that BAC has not, and will not deceive mortgagees to default on loans BAC originated or services in an effort to collect servicing fees and avoid recognizing losses. We evaluate each loan modification proposal on its merits and are in no way coerced by potential litigation or prosecution to make offers that are not in the bank’s best interest. Please desist in all such spurious accusations and inuendo.

    P.S. As a full service bank, we would like to offer you a very favorable refi on any obligations you may hold.

    Sincerely,
    Brian Moynihan

    1. LeonovaBalletRusse

      From Refi to RICO in one quick flip. Occupy Charlotte 2012:

      BILL BLACK/YVES SMITH 2012: JUSTICE NOW OR NEVER
      Chris Hedges: Secretary of State

  8. Alex Levin

    This reminds me of a story that gov’t employee that told a Floridian woman that maybe she should post her complaint online if she wants anything to get done. She did, the story went viral, and problem was fixed. seems like this is the only way to get some of these companies’ attention.

  9. Carpe D.

    Could this be the same tactic used in the “cash for keys” program that was offered to me after my possible wrongful foreclosure? A local realtor told me, ” I’m authorized to offer you $1,000.00 (to help with moving costs) if you hand over the keys, sweep and move out, and sign this agreement.” The agreement stated that I shall relinquish my rights about holding anyone accountable for a big list of all wrongdoings including blatant fraud. This says to me that there is a desire to cover something up. Right?

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