When the federal government and the five major banks announced their $25 billion mortgage settlement in February 2012, commentators noted that there would not be a lot of money for the victims of the foreclosure debacle. Still, they said, the agreement had an important component: rules designed to force the lenders to institute new, consumer-friendly policies and procedures. The idea was to make sure that banks could no longer harass consumers or browbeat them into complying with unfair and often unethical demands from the lenders.
But, as the Huffington Post noted at the time, the ability of the states — and Maryland was one of them — to enforce the settlement agreement, including the adoption of new policies and procedures, has been “one of the great unknowns.” In crafting the agreement, the parties failed to include an enforcement mechanism, a hammer the states’ attorneys general could wield if the lenders fell into old, bad habits.
It turns out that enforcement has been left up to the courts, as a recent decision against Bank of America Corp., one of the lenders with the worst reputations during the foreclosure crisis, illustrates. While the case was not from Maryland, the judge is well-known and well-respected; his actions carry weight with other courts.
The homeowners in the suit had declared Chapter 7 bankruptcy. Their mortgage loan was charged off, but the bank still had the right to foreclose. Bank of America, however, continued to barrage the couple with phone calls and letters demanding payment. Their attorney contacted the lender and explained that they no longer had any personal liability for the loan, but the bank continued its collection efforts. The bank took its time responding to the judge’s order, as well.
The judge ordered the bank to pay $10,000 per month for every month it attempts to collect on a debt that was discharged in bankruptcy. He admitted that the penalty may not mean much to the bank, but “at least it will send a message that other attorneys may pick on.” The judge is hoping that attorneys will begin to ask for similar sanctions in cases like this one, because, as the judge wrote, “This is not just a stupid mistake. This is a policy.”
If you have questions about personal bankruptcy or a lender’s actions after bankruptcy, we urge you to consult with an experienced bankruptcy and foreclosure attorney.
Sources:
Wall Street Journal, “Bankruptcy Judge Sends a Message to Bank of America,” Peg Brickley, Oct. 4, 2013
Huffington Post, “National Mortgage Settlement: States, Big Banks Reach $25 Billion Deal ,” Loren Berlin and Emily Peck, Feb. 9, 2012