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Reply #74: Michael Olenick: Bank of America All In Calling Moynihans Bluff to Bankrupt Countrywide [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Dec-08-11 09:55 AM
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...the idea that Bank of America can shield itself by putting Countrywide into bankruptcy. Note that, some litigants, particularly AIG in its petition in opposition of the proposed $8.5 billion settlement of putback liability on 530 Countrywide trusts, made a persuasive case that Bank of America has operated Countrywide in such a way post acquisition so that it is no longer bankruptcy remote from BofA (that is, you cant BK Countrywide and deny Countrywide creditors access to BofA assets).

Nevertheless, as attorney and former monoline executive Tom Adams noted by e-mail, the reason Bank of America might want the servicing at BofA rather than Countrywide if Countrywide is put into bankruptcy is probably to avoid a servicing termination event. If the servicer is bankrupt, the trustee or investors could, in theory, terminate them as servicer. This is really only theory, because almost no one (other than BofA) would want to be servicer for these loans, so it would be hard to see it as a driver of the changes Olenick describes.

An interesting related issue is that BofA, like other servicers in this new world of costly and lengthy foreclosures, is at risk of over advancing on mortgages. Servicers advance principal and interest even after a borrower has defaulted and reimburse themselves when the foreclosed property is sold. In theory, they can stop when a loan is clearly irrecoverable. In practice, historically many servicers have kept advancing up to the full principal balance of the loan. With loss severities rising and more borrowers fighting foreclosures, they can incur more costs than the house is worth, but on average, they still recover their advances. But with foreclosure timelines attenuating, legal costs escalating, and foreclosures grinding to a halt in states like Nevada, New York, and New Jersey, where they are now real sanctions for filing questionable foreclosure documentation, servicers face increasing doubts about their ability to recover advances from the proceeds of home sales. I hope the FDIC is watchful enough not to allow deposits to be used to fund servicer advances.



Bank of Americas subsidiary BAC Home Loans has filed foreclosures in FL under 286 slightly different names. For example, in the 28 Florida counties that I track, BAC Home Loans Servicing has 6,089 filings, BAC Home Loans Servicing LP, FKA Countrywide Home Loans Servicing LP has 5,657 filings, BAC Home Loans has 3,050 filings, and BAC Home has 2008 filings. Altogether there are 21,913 filings.

Bank of America has filed under 283 different names. Most are variations one would expect but some pop out: Bank of America NA, SBM Countrywide Bank FSB has 85 filings. Altogether there are 44,504 filings with some derivation of the name Bank of America.

Robo-signing slowed down BAC filings, like it did all filings, though as the leaves fell from the trees in the northern states, so did the filings in the name of BAC Home Loans. I track 359 filings in June, 2011; 321 filings in July, 28 filings in August, nine filings in September, and twelve filings total in the fourth quarter.

But Bank of America didnt stop filing; they actually increased their volume. In June, 2011 Bank of America filed 178 foreclosures; 169 in July, 362 in August, 471 in September, 579 in October, 452 in November, and 76 in this first week of December...

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