Review mortgage denials, bank told

Tuesday, June 25, 2013

An institutional investor is calling on Bank of America Chief Executive Officer Brian Moynihan and the bank’s board to investigate allegations from former employees that they were encouraged to deny homeowners seeking mortgage modifications under a federal program.

In a letter filed with the Securities and Exchange Commission, the shareholder, Houston-based Finger Interests Number One, blasts the board and the company’s management in light of the employees’ claims, saying “nothing has really changed” under Moynihan and the leadership of Chairman Charles Holliday.

“The case and, more importantly, the affidavits … say volumes about the failures of senior management and the board of directors to materially change the corporate culture that has long existed at Bank of America prior to Brian Moynihan’s ascendance or most of this board of directors’ inauguration,” says the letter, which the SEC posted on its website Monday.

“Each new headline chips away at the company’s image and damages its standing with customers and potential customers. In consumer perception of reputation among banking companies, Bank of America ranks dead last.”

According to the company, Finger owns roughly 1 million Bank of America shares, or less than 1 percent of the bank’s outstanding shares.

The letter comes on the heels of statements - six from former employees, one from a contractor - filed this month in federal court in Boston, where class-action status is being sought for a lawsuit against the bank over the federal Home Affordable Modification Program.

The homeowners in the lawsuit claim that the Charlotte, N.C.-based bank wrongfully denied them modifications under the Home Affordable Modification Program and violated the program’s rules. Bank of America, the lawsuit said, would “string homeowners along with no intention of providing actual and permanent modifications.” Among other things, homeowners complained the bank lied to them in saying paperwork hadn’t been received.

According to the former employees’ statements, Bank of America employees were given gift cards and $500 bonuses if they steered homeowners into foreclosure rather than a modification.

The bank, which is expected to file its reply to the employee statements next month, has said they are filled with inaccuracies and called them “absurd, patently false and contrary to Bank of America’s long-standing policy only to foreclose as a last resort when other available options to help keep people in their home have been exhausted.”

But the employees’ statements have led California Rep. Maxine Waters on the House Financial Services Committee, to call for an investigation of Bank of America.

Finger Interests said Moynihan and the board of directors should look into the employees’ claims and report to shareholders on the findings.

“If true, the six affidavits … are damning and evidence of unethical behavior and, more importantly, point to a corporate culture of not just ‘short termism,’ but of outright corruption and a disregard for laws, regulation and, of course, customers,” Finger Interests’ letter said.

Over the years, Finger Interests has been a frequent critic of Bank of America’s leadership, even before Moynihan took charge. Last year, Jonathan Finger, a partner in the firm, said he questioned whether the bank, in agreeing to the $25 billion foreclosure settlement between big banks and state attorneys general, was being careful about protecting the interest of shareholders.

Finger Interests is also among investors who sued Bank of America over the bank’s acquisition of Merrill Lynch, a deal that angered investors who said they were misled about Merrill’s declining financial health. A federal judge in New York in April approved a $2.42 billion cash deal to settle the claims.

Business, Pages 21 on 06/25/2013