The brouhaha over mortgage servicing mishaps and snafus doesn't seem to be having much effect on Bank of America's (NYSE:BAC) share price, particularly with all of the drama surrounding the Federal Open Market Committee's meeting, which did a bit of market roiling all on its own.
However, a lawsuit under way in Boston, alleging that B of A deliberately derailed loan modifications offered under the government's Home Affordable Modification Program, as well as the underwhelming National Mortgage Settlement monitor's report released this week, have been attracting media attention.
Both of these issues are likely to have a negative effect on B of A's already tarnished customer-service reputation and might wind up costing the big bank additional wads of cash, if California state Representative Maxine Waters has her way.
HAMP incentive payments at issue
Waters, a ranking Democrat on the House Financial Services Committee, recently sent a letter to several government entities, including the Office of the Comptroller of the Currency, the Federal Reserve, and the Special Inspector General for the Troubled Asset Relief Program. Alerted by an article in Bloomberg concerning the homeowners' lawsuit, Waters notes that Bank of America was the recipient of $992 million in HAMP loan modification incentives -- not to mention the oodles of cash it was handed as part of TARP.
Of course, the current loan modification suit puts the spotlight squarely on B of A, but the report from settlement monitor Joseph A. Smith shows that each of the Big Four have had their problems in that area. Both Bank of America and JPMorgan Chase (NYSE:JPM) failed on two of at least 12 benchmarks used to assess the banks' progress on the settlement, and Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) were lax on one each. JPMorgan and Citi both had the good grace to admit their failures and declare that they were working on fixes; Wells and B of A had no comment, which, for the latter, may only make it look even less sympathetic in the public opinion.
Another lawsuit in the making?
It remains to be seen whether Waters' request will prompt any action. Her letter asks that servicers that "you have reason to believe" were involved in any fraudulent behavior regarding HAMP be investigated -- with B of A being specifically mentioned, of course, because of the testimony in Boston.
It is quite possible that all of the big banks might be on the agenda for another mortgage-related investigation, courtesy of the U.S. government. While it is interesting that a senior member of the HFSC had to depend upon the mass media to hear of these allegations, both the monitor's report and the shocking revelations being aired in a courtroom in Boston show that the big banks really have only themselves to blame for being constantly under scrutiny.