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New Whistleblower Describes How Bank of America Flagrantly Violates Dual Tracking, Single Point of Contact Requirements in State/Federal Mortgage Settlement « naked capitalism.
Bank of America trained its employees to outright lie to customers who have applied for mortgage modifications according to an eye-opening whistleblower account the above article recounts. Even more interesting is an affidavit of Simone Gordon, a former Bank of America Employee who states under oath the following:
“We were told to lie to customers and claim that Bank of America had not received documents it had requested, and that it had not received trial payments (when in fact it had). We were told that admitting that the Bank received documents would “open a can of worms” since the Bank was required to underwrite the loan modification within 30 days of receiving those documents, and it did not have sufficient underwriting staff to complete the underwriting in that time.”
I have heard these accounts for years from my clients who consistently complained that the mortgage company lost their paperwork, gave them different answers each time they called to check on the status of their loan modification and more or less jerked them around for months until their property was put into foreclosure. The affidavit goes on to state:
- BOA ordered their employees to hold financial documents submitted by borrowers for at least thirty days so that the documents could be considered “stale” and the homeowner would have to reapply for the modification;
- BOA rewarded employees with bonuses and gift cards when they placed accounts into foreclosure even if a modification was pending.
- BOA employees who were caught not carrying out the delay strategies or admitting the borrower was entitled to a modification were disciplined and sometimes fired without warning.
The sad thing is that BOA has gotten away with this corporate fraud. Litigation is pending now, however, I am not very confident or hopeful BOA will every be reprimanded harshly enough to change their harsh treatment of consumers. This is now the industry standard.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for June 13, 2013 Carbon Motors files for bankruptcy in Indianapolis How Detroit bankruptcy could unfold vNet founder files for bankruptcy
One of the most common reasons why people file bankruptcy is to stop harassment from debt collectors. Debtors who file for protection should be aware of their rights and how to protect them. With a large number of people struggling during these hard economic times, debt collectors will do whatever it takes to collect payment. [...]
Some religions forbid people from charging interest on money loaned. A New York bankruptcy court shows that it doesn’t need to stand in the way of commerce.
We don’t talk about Chapter 11 bankruptcy here because I don’t usually take on those sorts of cases. And we seldom discuss religion because it’s not often that matters of faith intersect with matters of money.
But the curious case of Arcapita caught my eye as an example of how faith and money collide in odd ways.
Bahrain’s Arcapita Bank took a rare and bold step of filing for bankruptcy in New York in March 2012, going against the common practice of Middle Eastern companies to engage in debt workouts relying solely on consensual talks.
The numbers aren’t important, but the company was faced with a difficult situation in fashioning a plan to repay creditors.
That problem was that Sharia, Islamic law, got in the way.
Interest-Free Lending?
Sharia prohibits the payment or acceptance of interest or fees in lending. So, too, is it forbidden to invest in a business that provides goods or services considered contrary to Islamic principles.
This is similar to the Old Testament, which encourages loans to people so as to enable the poor to regain their independence, but forbids the charging of interest on the loan as being exploitative.
I’m sure there are other faiths and denominations that speak to a prohibition against charging or paying interest. If you know of one, let me know in the comments section below.
Arcapita’s Chapter 11 Problem
Unfortunately, business turns on the ability of the lender to obtain a return on investment that makes it a good idea to lend money in the first place.
Under Chapter 11 bankruptcy, you’re putting together a plan to repay your creditors over the long run. Agreements are modified under court supervision, then the parties go off to perform accordingly.
But without the ability to pay interest to the largest secured creditor in the case, Arcapita was in a tight spot. If it didn’t agree to pay interest to the creditors, there’s no way a Chapter 11 Plan would get confirmed.
The Murabahah Solution
What if the loan would be repaid at a set price that already included a profit margin acceptable to Arcapita and the lender?
The lender is compensated for the time value of money in the form of a profit margin, the borrower can do the deal, and the Chapter 11 Plan can be confirmed.
That’s exactly what Arcapita did. It’s called Murabahah, a “rent-to-own” type of arrangement that allows business to move forward. This is also how mortgages are often handled under Islamic law, fixing the costs at the time of contract.
No late payment penalties are allowed, which is why Islamic banks apparently ask for higher down payments to offset the risks of nonpayment.
Bankruptcy Court As Problem Solver
The Arcapita solution, which is the first Sharia-compliant Chapter 11 Plan on record in this country, shows that the bankruptcy court isn’t always a strict place to be.
Rather, I’ve found that in difficult situations it’s the bankruptcy court that helps fashion a solution that works for everyone.
In New York bankruptcy courts, loss mitigation allows the parties to come together to modify a home mortgage in ways that are at times extraordinary.
Disputes are handled, assets divided, and creditors made whole without being unfair to those who look for help.
This is an exceptionally unusual situation, but Arcapita’s Sharia-compliant Chapter 11 underscores just how well bankruptcy can work.
Image credit: JohnConnell
Sharia And The Chapter 11 Bankruptcy Problem was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
When you decide to work with us to determine if Arizona bankruptcy is the right choice for you, we will want to review all of your property (assets) and your debts. To read more about the kinds of information we will want, read our article on “Gathering All the Facts.” We will also want [...]
Peggy Tanous, former star of the television series “Real Housewives of Orange County” files for Chapter 7 bankruptcy protection. Known as a wealthy party girl to TV viewers, her financial liabilities include owing millions to a number of creditors including credit card companies, mortgage loans, and property taxes. Even though she reportedly owes millions, Tanous [...]
When you decide to work with us to determine if Arizona bankruptcy is the right choice for you, we will want to review all of your property (assets) and your debts. To read more about the kinds of information we will want, read our article on “Gathering All the Facts.” We will also want […]The post Determining Your Personal and Household Expenses in Arizona Bankruptcy appeared first on Tucson Bankruptcy Attorneys Trezza & Associates.
You may be able to settle your federal student loans.
You probably know that there are only two guarantees in life – death and taxes.
And you’ve also been told that when it comes to federal student loan debt, you’re on the hook for the full balance.
I can’t comment on the first (I pay my taxes but, to date, have not died) but I can tell you that settling the student loan beast isn’t a pipe dream.
Depending on your situation, it may or may not work out for you.
Federal Student Loan Settlement Guidelines
If you’re in default on your federal loans, the U.S. Department of Education explicitly allows debt collectors to settle your debt. If you’re current, that’s not going to happen.
Compromises are account settlements that involve a reduced overall payment to satisfy the federal student loan debt in full. Compromises are not to be offered as the first option in collection negotiations, and debt collectors are instructed to discuss it as an option after exhausting other negotiation opportunities.
Types Of Federal Student Loan Settlements
The U.S. Department of Education allows three types of settlement options:
- Standard compromises, which are as follows:
- You pay only the current principal and interest (waiver of projected collection costs/fees);
- You pay at least the current principal and half the interest (50%); or,
- You pay at least 90% of the current principal and interest balance.
- Discretionary compromises, which involve a payment of less than the standard compromise amount. All discretionary compromises require prior approval by U.S. Department of Education, so the collection agency can’t agree without some back-up documentation; and
- Nonstandard compromises, which are offered to only a very limited number of student loan borrower without approval by the U.S. Department of Education.
How A Federal Student Loan Settlement Gets Paid
If your settlement is approved, you’ll have to pay it by certified funds (cashier’s check, money order, certified personal check) or by credit card. The collection agency will not accept personal checks.
In addition, all settlement offers are valid for 90-days from the date of the date of approval. If you’re going to be making payment after the 90-day deadline, the collection agency will need to get approval from the U.S. Department of Education.
After Settlement, The Tax Man Cometh
When you settle a debt, you will get a Form 1099 in the mail. You may need to pay taxes on the forgiven amount of the loan, so be careful to factor that into your calculations before settling.
Get A Student Loan Lawyer Involved Or DIY?
I’ve had clients come to me after they tried to settle their federal student loan debts on their own, only to fail miserably. Some people have done themselves in by their words or actions, others can still be helped.
It all depends on you, your ability to negotiate on your own behalf, and the attitude of the debt collector.
But as far as I’m concerned, the risk of an unsuccessful negotiation is far larger than the cost of getting me involved. If you’re talking about $20,000 in federal student loan debt, settling it is going to make a huge difference in your life – why risk it?
Image credit: TiggerT
The Truth About Settling Federal Student Loans was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
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