This Foreclosure Lawyer Expects More Fines Over Risky Loan Packaging Even in the Face of This Week’s Bank of America Court Decision
When you’re involved in foreclosure defense, you get a front row seat on some of the risky lending practices that fueled the foreclosure crisis that continues to plague this country. So an item featured yesterday on NPR’s Morning Edition caught my eye. The title was “Bank Of America $1.2 Billion Mortgage ‘Hustle’ Penalty Thrown Out” It was about a ruling by a Federal Appeals court that reversed a lower court’s decision to penalize Bank of America for continuing risky lending and investor practices even after the mortgage crisis started to bubble up in 2007.
The ruling reversed a lower court’s decision to fine Bank of America $1.27 billion for alleged violations by its Countrywide unit. According to the NPR story, “The case got attention in 2012 because it appeared to pull back the curtain on some of the widespread wrongdoing in the mortgage industry that led to the worst financial crisis in generations.” Those included making risky loans and knowingly selling them to investors even after the housing market was already falling apart.
While this is certainly a blow to the federal government’s prosecution, it’s not the end. As a veteran mortgage defense attorney, I forecast this ruling will not stop the government from searching for others who engaged in the risky lending practices that led to the meltdown. Why? Because it was a robust mortgage-backed securities market that led to the risky lending practices in the first place. There still is a market for mortgage-backed securities, which means there still is an incentive to make bad loans. The government can’t have a repeat of the mortgage crisis that brought the US economy to its knees. So, it will keep looking for offenders. As recently as 2014, many financial firms, including JP Morgan Chase, Citigroup, Goldman Sachs and even Bank of America agreed to pay billion dollar settlements over allegations that they misled investors into buying risky, mortgage-backed securities. They won’t be the last.