Only $16.65 billion – that’s a bucket load of Fraud! Bank of America – Here is your Ice Bucket Challenge.
“I challenge Bank of America to the Ice Bucket Challenge for ALS – you have 24 hours to pour the bucket of ice over the head of every one of your executives and donate $1 billion dollars to support ALS!” – Ken Gross
Here we go again. Thursday, it was announced that Bank of America has agreed to pay a settlement of $16.65 billion – the largest settlement ever! – to settle the government’s claims relating to selling fraudulently packaged mortgages and its role as being a major factor in causing the Financial Crisis.
The good part of the settlement is that $7 billion of the settlement is earmarked for homeowner relief in mortgage principal reductions, reduced payments and other forms of relief. One report I read indicated that some of the funds are designed to bring equity to homes – rather than to only cover the amount under water.
So what does this mean? I see two things. First, “Opportunity” if your mortgage or Home Equity line is held by Bank of America – once this settlement is completed, the required relief will be quickly given to homeowners. In the 2012 National Mortgage Settlement that was $25 billion, the lenders (BOA, Chase, Wells Fargo, Citi and GMAC/Ally) were incentivized to provide the relief quickly and penalized if they moved to slowly.
All of the lenders took advantage of the incentives and the relief was provided to homeowners quickly. During this short window, we found that loan modifications were easy to obtain with some tremendous reductions – when properly presented. This means if BOA is your lender and you have little or no equity or are underwater, you should have the matter reviewed to see if you stand a chance at gaining a beneficial result.
The second point is a “Wakeup Call” for all of us. Prior to Thursday’s blockbuster $16.65 billion, Citi agreed to a $7 billion settlement, Chase to $13 billion and the Big 5 a $25 billion settlement. In total that’s $61.65 billion and negotiations are still pending with Wells Fargo and Goldman Sachs. That’s a whole lot of money – and a whole bucket load of fraud that has been perpetrated by these companies on investors and consumers.
Bottom line – these banks lied, cheated and stole from their customers. If any of us engaged in such conduct and were caught, we would be looking at jail time – not having our company pay a fine.
So what’s the lesson? As a law student (a few years back), I was taught, “Don’t get mad, get even!” When a client comes to me with excessive credit card debt, paying 20-32% interest, such that the interest payments overtime will deprive him or her of any chance to amass savings to retire – we help them “get even” by developing the strategy to get them out of paying the debt for as little money as possible so they can start saving that money rather than making credit card payments for life. Sometimes, people ask me, “Is that the right thing to do?” Well, my reply is that I have 61.65 billion reasons why it sure as hell is the right move.
If Bank of America wants our approval – then let them step up to my Ice Bucket Challenge for ALS!
Enjoy the weekend – and be sure to sign up or tell your friends about our upcoming Seminar on September 10th!