Swamped by huge volumes of delinquent mortgages, servicing managers at Bank of America, and Wells Fargo & Co. placed heavy pressure on staff to speed up handling of documents used to process foreclosures without properly reviewing their work, according to HUD audits released Tuesday.
The Department of Housing and Urban Development's inspector general issued separate reports about foreclosure-handling practices at five mega banks – firms that today control roughly 60% of all housing debt in the U.S., according to calculations made by National Mortgage News and the Quarterly Data Report.
The HUD audits also include JPMorgan Chase, Citigroup, and the government-owned Ally Financial Inc., which uses the trade name GMAC Mortgage.
The results of these audits were published after the five filed court documents Monday settling allegations they violated state and federal foreclosure laws and overbilled customers.
The IG reports were used by federal officials as evidence of foreclosure violations, serving as leverage for the government during the settlement process.
The HUD IG became involved because the FHA guarantees loans originated and serviced by the five. Wells, B of A and Chase are the three largest GNMA servicers in the U.S.
"I believe the reports we just released will leave the reader asking one question — how could so many people have participated in this misconduct?," said IG David Montoya, said. "The answer: simple greed."
The IG said overwhelmed Wells workers voiced concerns to their managers about signing loan documents, informing managers that they could not handle the caseloads given to them. The servicer, however, didn't correct the problem and instead cut the mandatory time frame for turning around documents from five to seven days to 24 to 48 hours, the report found.
"Due to attorney feedback and our wonderful challenging environment, this 48 hour turnaround time is critical," a Wells Fargo manager said in a March 2008 email quoted in the report. The bank 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.
A Wells Fargo spokeswoman didn't immediately comment.
The report on B of A included statistics showing one bank manager signed roughly 8,800 documents per month 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."
