Bank of AmericaBloomberg is running a compassionate profile of Barbara Desoer, the president of Bank of America's (BAC) home loan unit, and both the headline and the article call her "besieged." Now, I don't want to pick on Desoer, because the point I want to make isn't specifically about her. But the profile, and the BofA mortgage operations described in it, provide a good context for showing why it's not the bankers at the top, like Desoer, who deserve public sympathy.

Unlike the millions of homeowners struggling to keep their homes, top bankers have the power to transform the situation any time they choose. Witness their ability to halt foreclosures overnight.

What makes Desoer so "besieged"? The core problem appears to be the lousy lending practices at Countrywide, the huge mortgage company that BofA bought during the housing boom. Those practices led to an investigation by 11 attorneys general (and an $8.4 billion settlement with four of them) related to Countrywide's practice of misleading borrowers with the weakest credit into taking the riskiest loans. Investors in mortgage-backed securities now seeking to force BofA to buy back toxic securities have also focused on Countrywide's loans.

Going Up the Mortgage Food Chain

But perhaps the biggest task swamping Desoer is servicing the 14 million mortgages in BofA's portfolio -- and overseeing efforts to modify or foreclose on the 1.3 million that are delinquent. Although Bloomberg's profile doesn't specify the percentage of those loans traceable to Countrywide, it's surely a significant number.

Any feeling of being "besieged" due to Countrywide's lending is traceable to two sources: Angelo Mozillo, the Countrywide co-founder whose company made all those bad loans, and Ken Lewis, the BofA CEO who decided to buy Countrywide and its rotten portfolio. And this kind of beseigement -- being stuck with large portfolios of delinquent and defaulted loans and all the attendant consequences -- isn't unique to BofA.

As the housing bubble inflated, banks abandoned basic underwriting principles. For example, they loaned against a home's full value, instead of requiring the once-standard 20% down. They loaned to borrowers without asking for proof of income or assets (so-called stated income loans), never mind requiring a thorough credit-risk assessment. Indeed, the banks couldn't get enough of these loans. So the big players snapped up subprime lenders: Merrill Lynch (and thus ultimately BofA) bought Wilshire Credit and Home Loan Services; Bear Sterns (and thus ultimately JPMorgan Chase [JPM]) bought EMC Mortgage; Wells Fargo (WFC) bought Wachovia; and on and on.

Not Exactly Income "Verification"

I spoke with Peter Herbert, who was a loan officer during the housing boom's key years of 2002 through 2008. He told me about the "underwriting" involved in those stated-income loans. For example, he was told it was OK to go to salary.com, put in a potential borrower's job, location and experience, and take the income the website generated at the 75th percentile, meaning the income greater than three-quarters of other people with that job and experience. That happened even when the borrower could prove he had a lower income. It was OK, because Herbert could then sell that loan to investment banks willing to package it into a mortgage-backed security.

Should we all feel bad when the consequences of years of horrific, greed-driven lending decisions overwhelm the bankers who made them, or like Desoer, take jobs trying to manage the consequences of such loans other people made?

So what might Desoer and other top bankers do to feel a bit less besieged? Well, they could start by employing enough people to competently cope with the delinquency fallout from all the crazy loans they made. And yes, borrowers agreed to the loans -- although in the worst cases they signed documents with blanks in them and the mortgage broker filled in fraudulent information the borrower was unaware of. Nonetheless, prior to banks' ability, via securitization, to shift the risks of a bad mortgage from their balance sheet to others, none of these loans would have been made no matter how much a borrower begged. Witness, for example, the strict lending standards banks have reimposed since the mortgage meltdown got started.

Too Big to Fail, Too Small to Succeed

Desoer makes an effort to feel the homeowners' pain, starting off her weekends by listening to 20 of the roughly 500,000 calls from homeowners that BofA received that week, many of them "struggling to keep up with their loans." The profile isn't clear about who fields those calls. However, it does note that the loan workout staff numbers 18,000, while the number of delinquent loans is 1.3 million. That works out to 72 delinquent mortgages each, and even if they didn't field a single one of the 100,000 calls a day, that's still a huge amount of work.

Mortgage employees at BofA and elsewhere must be overloaded given the abundant stories of modification program failure, including banks' losing the documentation submitted by homeowners; given modification departments failing to communicate with foreclosure departments, so that homeowners complying with trial modifications get foreclosed anyway; given foreclosure departments flouting the rule of law by using robo-signed and otherwise false documents in foreclosure proceedings; and given that occasionally, homeowners still get wrongfully foreclosed on, such as when they bought the house with cash.

Desoer told Bloomberg that "her best quality is common sense." If that's true, I urge her to reexamine her staffing levels.

So, if top bankers don't deserve our sympathy for being 'besieged' by the bad loans they made, who does? How about the large chunk of homeowners struggling with their mortgages not because they fundamentally took on loans they shouldn't have, but because the recession has hurt their income?

Or how about the homeowners who, seeing the handwriting on the wall, tried to head off deeper trouble? Many of those folks call mortgage servicers and say, "I'm not in default yet, but if things don't change I will be. Can we do a modification?" And the bank says: "Sorry, we can't talk to you until you're three months in default." (Securitization agreements often require a default before modification.) And then once the homeowner is in default, instead of a modification, she gets foreclosed. How about some sympathy for those folks?


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cimerring

PLEASE SEE THIS SITE conorix.com

November 17 2010 at 12:35 PM Report abuse rate up rate down Reply
Wayne

Abigail: Your being nice to Marie Antoinette alias Barbara Desoer .. You must have a soft heart for those who should have her head handed to herself on a platter. Have you ever read some of her remarks that were printed when this all first started. Her arrogance deserves the act of beheading. If your article isn't about her it should be. For it was Barbara who in the beginning did not want to alter a contract and talked about contract law this and contract law that. Was that before she found out the contracts were lost stolen or destroyed? Was that before she knew about mortgage pools and assignments not recorded. Again was that before she knew she had a problem with traceability. Was it under her authority to offer a contract to people, disguised as a modification only so she could have some kind of proof to foreclose on people, when in fact Bank of America knew they had no proof of a contract with the people in the first place. May her empire fall and have her burnt at the stake or beheaded. The people she has working for her should watch her be destroyed and have it be known they are next. I personally would not know one bit of this if and only if they would have given me what was promised to me. That was a low fixed Rate before my ARMS adjusted. It was Promised to me!!!!! If they would have done that I would have still be paying on my WAY UNDERWATER HOUSE on the original loan for the original amount and I WOULD NOT HAVE KNOWN ONE THING ABOUT THIS CORRUPT SITUATION. Now what I know and what I have learned, I have refused to pay on my mortgage and it is now in it's 19th month. I have even asked the Banksters of America to foreclose on me at least a dozen times. It's funny how they respond to those who knows what is going on. They don't want any part of us. So here I sit ....19 months and counting.

November 01 2010 at 10:29 PM Report abuse +1 rate up rate down Reply
jerri2222

ok.......I wanna keep my house....I don't think INDY MAC BANK (One West) did the right thing by me....and I've never heard one good thing about them... or helping anybody with a Loan Mod....So yes I want a forelosure Freeze and I want just one good lawyer to do the job ....and I hear Forensic Audits are a joke ,,,So Whats the Real answer ? I don't want opinions , I want Facts..& Laws...for NY homeowners...

November 01 2010 at 8:41 PM Report abuse rate up rate down Reply
art1896

BE GENTLE WAYNE

November 01 2010 at 8:06 PM Report abuse rate up rate down Reply
2 replies to art1896's comment
Wayne

Be gentle wayne ????? ok art ... here is what it is .... Don't go to a gun fight with out a loaded gun. I will shoot you between your eyes for I am not an imbecile and I am one of those people who are facing foreclosure. The only difference is ... is that I know what is going on and I know about contract law and I know the difference between right and wrong. For this reason and this reason alone I have refused to pay someone who can not tell me who they are paying with my money. I do know what I am doing and what I am doing is not only fighting for my Rights but for your Rights as well. For those who are paying on their mortgage might be just in the same boat only facing the wrong direction not knowing they are getting screwed. Just ask the Lawyer from Tennessee who paid off his second mortgage. He didn't think for one minute he had a problem. So not paying on my loan for 19 months is my way of Throwing the Tea into the Bay .... And ya know what ... I am proud of what I am doing. I am still fighting and not just for me.

November 01 2010 at 10:49 PM Report abuse +1 rate up rate down Reply
GemINIanaDiva

I'm with you Wayne. Anyone with a mortgage assignment with MERS listed as nominee is a fool if they continue to throw their payments into a large, deep, black hole. Until the feds are through with investigating and penalizing all parties involved, everything stands at a halt. Local attorneys could not possibly keep up with all the indivdual cases they'd handle if people really knew what's going on. Again, I'm with you...I'll stand my ground of 55 years until they come to suck even my blood to the last drop. After that, if they prevail, there's not much justice left to fight for anyway. The country will have fallen into (even further) evil failure--one I will gladly disappear from.

November 01 2010 at 11:38 PM Report abuse rate up rate down Reply
jtmader

If Obama really cared, he would have the Attorney General breaking up these banks. Instead, he consolidated them, made them bigger, and made them richer at our expense. The largest 20 banks should be broken into many, many pieces, some on regional lines, others on business lines. None should be able to deal with stocks or bonds. None should be acting like investment bankers. However, the top bankers are all Harvard graduates like Obama and all his henchmen. He only says he is concerned about taxpayers, citizens, voters. He owes his loyaly to his school buddies with the money.

November 01 2010 at 5:58 PM Report abuse +1 rate up rate down Reply
1 reply to jtmader's comment
Wayne

You might have some truth there. It was the same with Bush. They are all the same just in a different dress.

November 01 2010 at 6:32 PM Report abuse rate up rate down Reply
art1896

WHAT DO YOU GET WHEN USE RAISE THE IQ OF AN IMBECILE(THE FORECLOSED BORROWER) BY 50 POINTS?

November 01 2010 at 5:47 PM Report abuse -1 rate up rate down Reply
2 replies to art1896's comment
Wayne

Ya know what you get .... art1896. or rather art1946. Try writing something of worth, otherwise keep your fingers off the key board.

November 01 2010 at 6:35 PM Report abuse +3 rate up rate down Reply
art1896

WAYNE, WHEN DID THEY FORECLOSE ON YOU

November 01 2010 at 8:21 PM Report abuse rate up rate down Reply
dwb3145

THE AMERICAN DREAM IS THE OPPORTUNITY TO EDUCATE YOURSELF AND FIND A JOB SUTIABLE TO YOUR SKILL AND MENTAL ABILITY. FIRST AND FOREMOST THE JOB AND SAVINGS MUST GO BEFORE THE OWNERSHIP OF PROPERTY FOLLOWED BY RESPONSIBILITY TO CARE AND MAINTAIN THAT PROPERTY. HOPEFULLY, ADULTS SHOULD BE AWARE THAT A BANK LENDS MONEY TO RESPONSIBLE PEOPLE. BAD THINGS HAPPEN WHEN THE OPPOSITE OCCURS. RESPONSIBILITY IS THE KEY IN MANAGING MONEY FOR INDIVIDUALS, BANKS, COMMUNITIES, AND GOVERNMENTS.

November 01 2010 at 5:45 PM Report abuse rate up rate down Reply
1 reply to dwb3145's comment
Wayne

you must be related to art1896.

November 01 2010 at 6:36 PM Report abuse +2 rate up rate down Reply
tljolesmidcon

WE ARE LIVING IN TOUGH TIMES, BUT LIVING IN A HOUSE YOU CAN'T OR WON'T PAY FOR OR DRIVING A CAR YOU CAN'T AFFORD, OR PAYING FOR CABLE TV YOU CAN'T AFFORD HAS NOTHING TO DO WITH PAPER WORK. LENDERS AND THE PEOPLE THEY LENT MONEY TO ARE BOTH AT FAULT.IF YOU DON'T PAY FOR THINGS, YOU HAVE TO GIVE THEM UP. IT'S JUST AN AWFUL TRUTH. IF YOU HAVE NOT MADE A HOUSE PAYMENT IN 6 MONTHS WHY DOES ANYONE THINK THEY SHOULD KEEP THE HOUSE,OR THE CAR.

November 01 2010 at 3:02 PM Report abuse +2 rate up rate down Reply
1 reply to tljolesmidcon's comment
Wayne

One more person who has no clue ... thanks for the effort for spewing your thought but I really wish you would type something you actually know something about. I have not paid my mortgage in over 19 months and it has nothing to do with what you are writting about. It is about the truth and fair play. I absolutely Know What I AM talking ABOUT. I have spent a year and a half investigaing this entire problem and believe you me when I say this, it has just about as much to do with those not paying their mortgage as it does with one who is paying their mortgage and doesn't even KNOW HE HAS A PROBLEM. My not paying my Mortgage is my way of throwing the Tea IN THe Bay. Ya know why .... It is because "I found out" and I have a set of Balls. Why would you think Banksters of America has not Foreclosed on me YET! Cause they are afraid too!!!!!!! I have even BEGGED them too.

November 01 2010 at 6:50 PM Report abuse +3 rate up rate down Reply
frank1946

Banks have decided the "Customer" is the enemy, fees, no re-fi's, etc. Banks are the new Anti-Christ, a disaster for the American worker ! I have never defaulted on anything in my life, have a 660 credit score and cannot qualify for a Re-Fi because I am self-employed and the Chase Banker refuses to read my tax returns correctly to quantify my income ! ! !

November 01 2010 at 1:25 PM Report abuse +1 rate up rate down Reply
2 replies to frank1946's comment
Consiglieri

You sound like a reasonable and responsible guy - and it is a shame that the banks are frightened to make prudent loans that they, but for the crisis going on, would otherwise have made in a heartbeat. Although I am NOT a banker, I can pretty well assure you that the banks don't think that the customer is the enemy - the customer is the bank's only way of surviving. You and our economy need them for sources of credit, etc. But they ned you as a customer in order to survive. But put yourself in their shoes for a minute. You want to refinance. Because you sound pretty passionate about this, can I guess that maybe you are looking for a better rate or to take some cash out because you need a few extra bucks around because maybe your business and/or you presonally are feeling a little stretched (like so many of us are)? If they lend you that extra money and your business continues to struggle or gets worse even for no fault of your own, they might caught get holding the bag. If they make that loan and home values drop by another 15%, they might get holding that bag. Isn't it kind of fair, while they are already drowning in bad loans, to understand why the Bank might be a little shy to take on the risk? You cn bet they'd like the revenue, but right now, especially with the govt. hammering them left and right, just can't afford the risk. At some point soon, the election rhetoric will calm down and hopefully the economy will be strong enough so the banks aren't as worried about what another drop in business or drop in home prices will do to the ability of borrowers like you to repay their loans. Then, at reasonable loan-to-collateral values, based on real, accurate information, the lending market will open up again (of course, we will probably all have missed out on these great rates)..... We all hate to pay fees for anything. But is it really unfair for the banks to charge a fair rate for the services that they provide? Or an unfair rate, if the person using those services or borrowing that money does not live up to their obligations? Would you be able to survive if your clients did not pay for your products or services? Just give it some thought....

November 01 2010 at 2:04 PM Report abuse rate up rate down Reply
Wayne

Oh you two are something else. I am talking to frank1946 and adep5 .... This article was written in half truths and rather in a very polite manor as if to give Barbara Desoer some sort of heart. You two are writting about What???? You two do not make any sense at all and clearly have no clue on what is going on.

November 01 2010 at 7:10 PM Report abuse +1 rate up rate down Reply
marine1942

Bamk of American----you are NOT TO BIG TO FAIL

November 01 2010 at 1:05 PM Report abuse +2 rate up rate down Reply