Bank of America came under fire last week when it was revealed that the nation's largest lender "significantly hindered" a federal probe into its foreclosure practices on FHA loans.
The report, filed by a Department of Housing and Urban Development inspector general on June 1, was obtained by Bloomberg News when it was admitted into evidence as part of a lawsuit filed by the state of Arizona, which claims the bank misled homeowners who were seeking loan modifications. The HUD report has not been made public.
In the report, HUD assistant regional inspector general William Nixon is quoted as stating in a sworn declaration: "Our review was significantly hindered by Bank of America's reluctance to allow us to interview employees or provide data and information in a timely manner." Nixon said he prepared the report "in light of possible future litigation."
Here's an excerpt from the Bloomberg story:
"According to Nixon's declaration, when interviews with Bank of America employees were permitted, the presence or involvement of the bank's attorneys 'limited the effectiveness' of the interviews. Attorneys also refused to allow employees to answer questions 'on a number of occasions.'"
The bank's delay in providing "readily available information" also hurt the review of the bank's processes and controls, Nixon said. The information provided in response to two subpoenas wasn't complete, he said.
"These omissions impaired our review because they prevented us from measuring the impact of Bank of America's foreclosure practices," said Nixon.
Bank of America spokesman Dan Frahm defended the bank, saying it cooperated with the HUD inquiry and "any suggestion otherwise is both inaccurate and inconsistent with how we work with all regulators." He noted that BofA had provided HUD access to more than 55,000 pages of material and voluntarily arranged interviews and depositions with two dozen employees.
Federal agencies and attorneys general for all 50 states are investigating how banks service mortgage loans and handle foreclosures. Settlement talks are underway with the five largest U.S. mortgage servicers, including Bank of America, JPMorgan Chase and Wells Fargo.
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