Wednesday, April 25, 2012

WSJ 3/13/12- pressure on foreclosure workers

[This article is relevant to questions that are raised in project  about entity level versus officer and employee individual liability as means to try to deter corporate wrongdoing.]

The Wall Street Journal, March 13, 2012, 3:20 p.m. ET

Government Reports Detail Pressure on Foreclosure Workers


Facing a wave of delinquent loans, managers at Bank of America Corp. BAC +0.37%and Wells Fargo & Co WFC +1.16%. pressured staff to speed up foreclosures without a proper review of the process, according to government audits released Tuesday.
Overwhelmed Wells Fargo workers voiced concerns to managers about signing loan documents and informed managers they "could not handle the workload," according to the inspector general of the Housing and Urban Development Department. But management didn't correct the problem and proceeded to cut the mandatory time frame for turning around documents to one or two days from between five to seven days to 24 to 48 hours, the inspector general said in a report.
A Bank of America manager apparently signed a foreclosure-related document about every two minutes of a typical work day for an entire two-month period, the inspector general said.
The HUD inspector issued reports about foreclosure-handling practices at five major U.S. banks, including J.P. Morgan Chase & Co JPM +1.00%., Citigroup Inc. C +0.51%and Ally Financial Inc., after the banks filed court documents Monday as part of a $25 billion settlement of allegations they violated state and federal foreclosure laws.
The inspector general's reports, unreleased until now, were held back as they were being used by federal officials as evidence of violations and served as leverage for the government during the settlement process.
Regulators and officials have faced criticism throughout the yearlong settlement negotiations for not doing a comprehensive investigation of alleged misconduct. Officials have pointed to the audits, among other investigations that predated the robo-signing controversy, to rebut those concerns.
The HUD inspector conducted the reviews because banks are charged with managing loans guaranteed by the Federal Housing Administration, which is part of HUD. When FHA loans default, banks submit claims to be reimbursed for any losses, but they can be forced to pay damages if they don't follow federal rules in processing those loans.
Banks have agreed to pay $5 billion in fines as part of the settlement, of which officials said $900 million will go to the FHA. The remaining $20 billion will be used for a variety of loan assistance to homeowners that owe more than their homes are worth and are at risk of foreclosure.
"The reports we just released will leave the reader asking one question--how could so many people have participated in this misconduct?" the inspector general, David Montoya, said. "The answer: simple greed."
Addressing the need for swift foreclosures, a Wells Fargo manager said in a March 2008 email that "due to attorney feedback and our wonderful challenging environment, this 48 hour turnaround time is critical," according to the HUD inspector's report. Wells Fargo also hired a former pizza restaurant worker, a department-store cashier and factory worker to process foreclosure documents in a Fort Mill, S.C., office, according to the report.
"The matters raised in the report cover observations that are two-four years old and they have been addressed," said Vickee Adams, a Wells Fargo spokeswoman. "Wells Fargo has made significant strides with implementing a number of changes in line with industry and regulatory servicing standards."
The report on Bank of America included statistics showing one bank official signed around 8,800 documents per month—or nearly one every two minutes for a typical 40-hour work week—in July and August of 2010. It also included employee performance reviews showing workers were expected to process as many as 50 documents per hour. The company "evaluated employee performance based in part on metrics for processing high volumes of documents," the report said.
Bank of America spokesman Dan Frahm said the report "references activities from over a year ago that have been addressed as we do all we can to modify loans when possible and to ensure foreclosures are fair when they are unavoidable."
Citigroup's mortgage unit "regularly signed foreclosure documents when not in the presence" of a notary public, as required by law, the inspector general said. The practice ended in February 2010. The report also noted Citi employees signed 60 to 200 documents per day. A Citi spokesman said the bank, at its own initiative, started working on improving its foreclosure-handling practices in fall 2009.
J.P. Morgan Chase declined to comment.
The report on Ally found an employee "routinely" signed 400 foreclosure documents known as affidavits per day and 10,000 a month, without reviewing the supporting documentation. The company "did not establish an effective control environment to ensure the integrity of its foreclosure process," the report said.
"We regret that possible procedural deficiencies with respect to certain affidavits occurred," Ally spokeswoman Gina Proia said. "When senior management became aware of the issue, they took quick and decisive action to address it."
—Nick Timiraos contributed to this article. 

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