It’s hard to tell whether the situation described in an article the New Haven Register is very unusual, or just under the radar by design. But either way, it does not pass the smell test.
The story is not as detailed as one would like, but in short form, a couple in West Haven, the Mandells, are facing foreclosure on a home they bought in 2000. George Mandell lost his job in 2010 and the couple tried getting a mod. They article report that they didn’t qualify for “certain modifications” yet later quotes Bank of America (their servicer; it’s not clear whether their loan is bank owned or securitized) saying that they made “several attempts” to assist them and they defaulted on past mods. Yet the article also says the Mandells haven’t made a payment since 2010 yet Bank of America says they have too much income to qualify for mods for customers “in need of assistance”. So it sounds as if basic facts are in dispute and the writer didn’t get to the bottom of it (for instance, did BofA offer past mods that the Mundells rejected, such as a catch-up mod that would have them paying more than their old mortgage amount for a period of time? That might square this circle).
The real nugget of this situation is that the Mundells have taken to criticizing Bank of America on all sorts of social media, and it appears they’ve become enough of a nuisance that the bank offered a mod, with a gag order attached, or more accurately, the bank wants them to sign a gag order, with a mod provided as inducement. From the New Haven Register (hat tip Deontos):
Bank of America offered the couple a chance to modify the loan on the Jones Street house they’ve owned for 10 years in order to make payments more manageable, but only with conditions that include essentially agreeing to a gag-order when it comes to the deal and the financial institution. That means keeping quiet about opinions of the bank on Facebook, blogs, websites and in the media, and taking down any existing postings — something that may be unexpected in a document relating to a financial matter.
The Mandells rejected the settlement.
“I cherish my rights to free speech,” George Mandell said. “We’re prepared to lose the house if we have to, but we’re going to fight it. We’re standing firm not just for ourselves, but hopefully for the rest of the people in the country. Because it’s gotta be cleaned up.”
The Mandells say people across the country are being presented with offers like this one from Bank of America and worry some aren’t reading the fine print. They’ve called or written to just about every agency out there that oversees banks and consumer affairs, as well as politicians, and expect the bank to begin foreclosure proceedings on their home in the next few weeks.
Bank of America’s comment is sufficiently convoluted so as to raise eyebrows:
But the bank says the terms are offered only to people who do not qualify for extreme modifications and that the non-disparagement clause is not commonly offered.
Huh? Are “the terms offered” the gag order? It appears so, since the last half of the sentence describes the non-disparagement clause as “offered” as opposed to “required”. Talk about double-speak. And what is an “extreme modification”? A hardship case? So they don’t seek to silence the really broke pains in the ass, only the ones with at least a little in the way of means?
“Not commonly offered” still sounds a lot more common than the Charlotte bank would have you believe. Earlier in the article, it notes:
The Arizona attorney general’s office had filed a lawsuit on mortgage-related matters against Bank of America and said the bank’s gag-order provision would prevent borrowers from speaking to investigators about their experiences, according to published reports.
That would seem to suggest these non-disparagement clauses are common in Arizona, or at least common enough to interfere with enforcement. Yet the Bank of American spokeswoman, Jumana Bauwens, maintained that these gag orders are not part of loan modification offered to customers “in need of assistance”. There is no way of verifying the accuracy of that statement, since anyone who has signed the non-disparagement clause will not be able to discuss it. And if it is to be taken at face value, this means that BofA is offering mods to people just to shut them up. Tell me how that squares with their servicing obligations under their Pooling and Servicing Agreements.
Even if this is just a one-off with some particularly loudmouthed borrowers (and the Arizona AG’s suit says probably not), this stinks. Even if the Mandells and the folks subject to gag orders in Arizona are crazies, it’s certain that some, if not all of these mods for silence deals are yet another rip-off of investors (as in it is highly improbable that they’d be “offered” only on bank-owned loans). And if this, contrary to Bank of America’s claims, is not all that unusual, it says that BofA has such deeply seated servicing problems that it prefers to bribe unhappy borrowers rather than clean up the rot. After all, if borrowers can’t talk to regulators about abuses they’ve suffered at the hands of Bank of America, those problems have effectively been expunged from the record.