Written by Administrator

Foreclosure Help:

BofA’s Nasty Foreclosure Machine Up Close and Personal

Bank of America has treated Dr. Ira Neighbors with an elaborate, bureaucratic cruelty that would make Kafka proud. Neighbors’s story exposes just how blatantly BofA lies when it tells homeowners “we’re here to help”. After you read his story I dare you to think BofA is acting in good faith during the mortgage modification process.

Dr. Neighbors successfully completed a trial modification with BofA, but then it refused to make it permanent. BofA invited him to try again, and Neighbors did, successfully completing his second trial. This time Neighbors hired an attorney to help sway BofA into making the trial permanent, and his lawyer succeeded. BofA sent Neighbors a package of papers to sign.

Enter Kafka

Neighbors noticed two things in particular about the papers: they had to be signed and returned within 10 days, and his signature had to be notarized by a California notary. Kafka enters through the notarization requirement, so let’s consider that requirement in more detail.

For starters, the purpose of a notary is to ensure that the person signing the document is actually the person whose name is being signed. Given the extensive contact back and forth between Neighbors and BofA, the fact that BofA had numerous copies of his signature as a result, and had just sent the papers to him, it’s hard to see how BofA would worry that someone else might try to forge his signature. It’s also hard to understand a forger’s motive; a loan mod agreement doesn’t result in getting a property, like an initial loan application, for example. In fact I’ve heard of many loan mod agreements that don’t have notarization requirements for the homeowners, probably for such sensible reasons.

I mean, it’s not like Dr. Neighbors is part of a “Document Execution Team“, “surrogate signing” somebody else’s name hundreds of times a day as an affiant, witness, and/or notary. No, Dr. Neighbors doesn’t work for a bank or a bank vendor like Lender Processing Services or Nationwide Title Clearing. Dr. Neighbors is a California homeowner temporarily teaching at a Louisiana University.

Notably, Louisiana is a plane ride away from California, particularly if trying to do something within 10 days, so Dr. Neighbors called up BofA and asked if a Louisiana notary would do. Presumably, if BofA were really worried about ensuring that the person signing the permanent modification contract really was Dr. Neighbors, the answer would be a resounding “YES!”

Interestingly, BofA’s representative did not want a Louisiana notary to authenticate Dr. Neighbors signature. Instead, BofA advised Neighbors to send the document back without notarization of any kind. “Phew,” Neighbors probably thought, “I’m so glad that after all this time BofA is willing to work with me and get this deal done.”


Sadly, BofA wasn’t. After reviewing the paperwork Dr. Neighbors returned on time, BofA told him it was rescinding its permanent modification offer. Why? Because his documents were incomplete; his signature wasn’t notarized. And BofA decided to foreclose. See that? BofA decides to foreclose because Neighbors does exactly what BofA has told him to do to avoid foreclosure. BofA is channeling Milo Minderbender with that Catch-22, no?

So Neighbors’s lawyer immediately appealed BofA’s decision, and BofA graciously changed its mind, saying, ok, we’ll give you another chance. Send us the documents again, but this time, get your signature notarized by a California notary. Note, BofA still isn’t working with Neighbors; BofA is still insisting that the Louisiana resident get a California notarization. But Neighbors isn’t about to let a meaningless but giant hoop like that stop him; he hops on a plane, finds a California notary, and sends in his absolutely t-crossed, i-dotted package.

Well aware that BofA has long since cashed the Cashier’s check he’d sent with his first set of documents, and certain that this time nothing is wrong with his papers, Neighbors relaxes for the first time in many months: he will save his home just in time for the holidays.

So when Neighbors opens the next letter he receives from BofA, he’s prepared to pop champagne. Silly Neighbors. BofA wrote him to tell him that it had again rescinded its permanent modification offer and was foreclosing on him. The reason this time? His second set of documents arrived six days after the original 10-day deadline.

By enforcing that deadline, BofA decided it didn’t matter that it had used up time reviewing and then rejecting the initial, unnotarized package by mailed letter. Nor did BofA cut Neighbors slack for the time it took to appeal the rejection and get BofA to change its mind, or to get to California for the transparently unnecessary notarization. I mean, it’s not like Dr. Neighbors dillydallied. His documents were received only 6 days “late”. If he’d been given a new 10-day deadline after the successful appeal, he would have been on time.

BofA’s Acting In Bad Faith

So this is what I mean about bad faith. BofA had no interest in making Dr. Neighbor’s loan modification permanent despite that being the implicit premise of a trial modification, despite BofA’s explicit claims to the contrary. BofA’s actions speak very clearly.

There’s another aspect of the games BofA played with Dr. Neighbors that I want to highlight. BofA imposed meaningless but very specific and logistically hard to achieve paperwork requirements on Dr. Neighbors and enforced it absurdly. Doesn’t that feel like a big F*** You to law enforcers, regulators, and anyone else who might consider all things robosigning and document fraud important? I mean, the banks have been very clear that they think that requirements like not committing perjury in court documents and not forging signatures, among other things, are meaningless technicalities.

That’s not to say BofA is foreclosing on Neighbors because of robosigning. No, BofA is foreclosing because it makes more money that way and/or just thinks any homeowner in trouble is an “irresponsible borrower” that must be foreclosed. Or BofA is just full of sadists. At this point I’m just not sure.

As to BofA making more money by foreclosing, consider the dynamics. During trial mods, you see, the homeowner is still in default, and late and other fees, including illegal ones, can build up. Over time those numbers become meaningful and can even affect whether a homeowner qualifies for a permanent modification. And when people are in default, BofA can apply their payments to BofA’s advantage. (Has anyone ever seen a statement from BofA or some other servicer that shows how it applied trial modification payments? If so, let me know in the comments and I’ll be in touch. From everyone I talk to trial payments seem to just fall into a black hole.)

If BofA makes the modifications permanent, BofA doesn’t get those accumulated fees now; they are simply added to the principal balance, which yes, does increase its servicing fee income slightly. (For a primer on the economics of servicing, see this report by the Special Investigator General for the TARP program, starting at page 155.) But if BofA forecloses, it can pay itself its fees from the foreclosure proceeds. So a servicer has incentives to keep borrowers in modification limbo land for some time and then foreclose.

At this point, please check out Martin Andelman’s funny take on Neighbor’s story here. Martin gives you Brian Moynihan’s perspective on how well BofA is doing its job and what Moynihan thinks of critical stories like these, as well as other choice tidbits. Most important, Martin gives you Brian Moynihan’s contact info so you can tell him to make Neighbors’s loan mod permanent before Thanksgiving. Please do get in touch with Mr. Moynihan.