Bank of America whistle-blower: “We were told to lie” | Hacker News Reader

Bank of America whistle-blower: “We were told to lie”

salon.com

131 pointsrpm432133 comments

Bank of America’s practice is to string homeowners along with no apparent intention of providing the permanent loan modifications it promises

Slightly start-up relevant: the same practice is often used by evil acquiring companies. They will target a start-up that is close to running out of cash, string it along with everything looking rosy, then pull the rug out at the last minute, and buy up the assets they want for pennies on the dollar in the bankruptcy liquidation.

I know for a fact that this is how Microsoft gets all of their office furniture.

terrible comment. joke or completely unsupported assertion?

downvoters: you are the cancer.

Downvoted for inaccuracy (the office furniture I had at Microsoft was new, on at least three office moves).

Very surprised those start-ups don't flick the proposed acquisition terms to one or more competitors of the acquirer and ask them to make an offer. Even a low-ball is better than a liquidation.

The story is missing some context for me. I can see how banks could induce default by putting people onto modification trial payments for long spans then denying the modification and demanding the difference... but what crazy incentive structure made it in the interest of bank employees to do this?

Like a lot of things I think this stuff will make more sense if I could understand how the incentives were setup.

I have the same question on short sales. Banks approve these things but then give buyers the run-around for months until they just give up. Eventually the forclosure goes through and the house is listed for 60% of the short sale price and sells a little higher.

I can't imagine why the bank would throw away 35% of the value and sell a house as a forclosure instead of helping a short sale go through. Has to be messed up incentives but I can't begin to guess how they are set up.

My guess is that they're writing off the full value of any bad loans, which reduces their taxable revenue from other sources. That must work out better for them then trying to get the loans paid back at reduced rates. Maybe they write off all of the high-rate interest for a 30 year loan period, which is way more than the likely income from a lower-rate loan over the same period. Nevermind that they could never actually collect the whole term's interest at the high rate.

Whenever you're trying to figure out BoA, you have to keep in mind a few rules: they cheat, they steal from their customers, they lie to everyone including the government, and they do whatever gives them the most profit. You can assume their actions make perfect sense in light of those rules, if you knew the the accounting.

Understood, and what you say _may_ factor into the thinking re: loan modifications, but my question was about short sales. In these cses the homeowner wants out and there is a willing buyer at X (which is less than the amount owed on the loan Y). In these cases why would the bank drag their feet when offered X (writing off Y-X) and opt to foreclose and accept Z which is .5X?

Unless they are in some weird tax situation where a dollar written off is worth more than a dollar earned (unlikely) the only motivation I can think of is spite or ineptitude (since the owners credit is ruined regardless and the bank makes less money).

There is perhaps some consideration to the fact that foreclosures are sold "as-is" for cash rather than financed with contingencies but that can't be worth the dollar amounts we are dealing with...

"Unless they are in some weird tax situation where a dollar written off is worth more than a dollar earned (unlikely)"

Actually, quite likely - $1 written off has a net "value" of $1 when written off, adjusted tax, etc., whereas $1 earned is actually $1 minus corporate tax rate.

The point is, in most of these cases, BoA is NOT the owner of the loan, they are just servicing it, and they make larger fees from foreclosure than they do from short sales. In other words, they are screwing both the homebuyer, and the investors who own the bonds which own the mortgage.

> what crazy incentive structure made it in the interest of bank employees to do this?

Nothing fancy:

> Senior managers provided carrots and sticks for employees to lie to customers and push them into foreclosure. Simone Gordon described meetings where managers created quotas for lower-level employees, and a bonus system for reaching those quotas. Employees “who placed ten or more accounts into foreclosure in a given month received a $500 bonus,” Gordon wrote. “Bank of America also gave employees gift cards to retail stores like Target or Bed Bath and Beyond as rewards for placing accounts into foreclosure.” Employees were closely monitored, and those who didn’t meet quotas, or who dared to give borrowers accurate information, were fired, as was anyone who “questioned the ethics … of declining loan modifications for false and fraudulent reasons,” according to William Wilson.

Do you know why BoA wants to foreclose on so many properties? In my naive understanding of American mortgages it seems to make more sense for them so keep mortgages active as long as people are paying.

Remember that BoA doesn't actually own the risk on the mortgage. That was sold to owners of the Mortgage Backed Security. BoA is the servicer of the loan. Think of it as a fund manager.

So when the mortgage is foreclosed, it's not BoA that takes the loss, it's the owners of the MBS.

The article says: "they also pushed people into foreclosure to collect additional fees from them." BoA has discovered that foreclosure is more profitable than loan modification for them due to the fees they charge in the former case.

Thanks! Thats exactly the detail I was missing.

Do they collect on the payments?

This whole story sounds like conflict of interests on a massive scale.

Still, why would the banks want the customers to be foreclosed upon?

Flagged due to two popup advertisements, that somehow got past my popup blocker. Salon did not used to be this bad.

I'm using Firefox with Adblock Plus 2.2.4 and Adblock Plus Pop-up Addon 0.7 and Flashblock 1.5.17 and did not get any pop-ups. I have not seen any in years. I'm just saying in case you wondered how you could block them. I understand that this isn't really the point here however as many other visitors may be bothered by intrusive ads.

I guess Chrome's built-in popup blocker is not as powerful.

Wow. I do wish these filtering tools we have would give an indication of just how obnoxious the site is. I didn't see anything either, but I might have linked it on twitter or something if not for your parent comment.

I have a mostly similar stack, plus I use NoScript and added every news site to the JS blacklist.

Tangent:

I am a paying customer for many online sites, but haven't yet found a news site I'd like to pay for. If a publication like Reuters or Al Jazeera charged membership fees and could develop an intelligent online community like HN, then I'd probably pay for that.

I'm only running ghostery with nothing else added onto my chrome install.

Nothing popped up for me either, I think you might want to look into your pop-up blockers.

Also on Chrome, which blocked it just fine, until I clicked on the page to close a _modal_ advertisement, where clicking is fair game to init a popup. Dirty yes, but a popup blocker is not going to block an HTML modal or `open` upon user interaction.

what i usually do is right click, select inspect element, and delete the element (and any sort of blanket/covering over the actual content). This gives them no opportunity to force javascript popups.

I dont know if salon works without it, but just remove javascript entirely from bad actors. Noscript is my best friend.

I might have been partly incorrect above, in that what I was describing as a popup might have been the initial modal ad. That would explain why I saw the second, actual, popup, and why Chrome reported blocking several additional popups after that. Still, a horrible experience served up by Salon, resulting in me not reading the article.

No pop-ups, but lots of weird Asynchronous loading going on in the background. I found that deleting the advert that's about halfway down the text from the DOM tree improved matters.

No popups, it definitely helps to just use Chrome's builtin javascript white-list.

I have four questions:

1. How widespread and flagrant is this kind of misconduct? Are BoA the black sheep, or just the worst of a bad bunch?

2. Hindsight is a wonderful thing but, at the time, was it reasonable for BoA to expect that they could get away with it?

3. Who knew what was going on? Who SHOULD have known?

4. What kind of pressures was BoA facing at the time when they started this policy? For instance, were they taking legal risks because the only alternative was financial collapse?

Can anyone shed some light?

The ex-employees listed specific executives by name who authorized and directed the fraudulent process.
...

These are senior executives who, if this alleged conduct is true, should face criminal liability.

Are we going to finally see a few bank executives in handcuffs?

Off-Topic: Most stories about politics, or crime, or sports, unless they're evidence of some interesting new phenomenon. Videos of pratfalls or disasters, or cute animal pictures. If they'd cover it on TV news, it's probably off-topic.

I would also like to see many more tech article and much fewer political ones. Especially ones about the NSA, this is one instance where it would be nice if there was some kind of partitioning to HM, possibly like reddit.

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