Barney Frank's letter to Bank of America and three other large banks

I'm honestly not that much of a Barney Frank fan, but I love his recent letter to the CEO of Bank of America and to the three other biggest bank CEOS, scolding them for being greedy when it comes to second liens that are involved in short sales.

Yes, only an obsessed man deeply involved in a short sale would really pay attention to something like this. But I have personally confronted the avaricious posturing of a major institution that is a second lien holder.

In my case, it happened to be GMAC, not on the list of the Big Four. It was GMAC that wouldn't accept BofA's $3000 offer for release of second lien, and it was GMAC that is squeezing a fairly substantial additional sum out of my coffers -- because they can. And GMAC is one of the sickest financial institutions and a major beneficiary of federal bailouts -- to date, not paid back.

It's a good thing that short sales are getting more attention now that we're getting close to the kick in of the HAFA rules in eary April. Why there was even a front page article in the NYT this morning on this aspect of the mortgage mess that has seemed way too esoteric for the general audience.

As to my own quest, which is supposed to end later this week, today was a day of minor progress. A hopeful initial negotiation with a potentially lethal parasitic lien holder. A scramble to obtain a totally unnecessary document that's being demanded by the title insurance company. But the end is nigh, and chances are decent there's going to be happy ending.

Bank of America, Brian T. Moynihan, and another collection agency

The end is in sight -- but there is a sickening and outrageous final twist that threatens to undo it all.

Bank of America's credit card department had promised that they would reach a reasonable settlement on a credit card debt owed by the owner of the short sale house. But I needed to get the other liens discharged first.

After two months of diligently and successfully negotiating to have the liens discharged, we go back to Bank of America's credit card department with the documents from the other lien holders. And we are told, callously and with no explanation, that the debt "has been placed with an outside agency."

What that means is that they have included this credit card debt in a bundle of loans that they've turned over to a highly disreputable debt collector, one of the sleazy, fly-by-night "law firms" that do the dirty work for supposedly legitimate (taxpayer-supported) institutions such as Bank of America.

This is a devastating setback. I had come to place my trust in Bank of America, because they at least have a mechanism in place that allows consumers to bring problems to a team of customer service reps who work in "the office of the chairman and chief executive." I've been working with one of those reps, and have come to trust him.

But when this crisis hit yesterday, he was nowhere to be found. It seemed that no one with a conscience or a brain was on call.

I still have faith that this will be resolved. I dashed off a letter to Brian T. Moynihan, president and CEO, both via email and Fed Ex. I'm hoping that Monday will bring better news.


Here is the open letter to Moynihan, with some details omitted:

Brian Moynihan
Chief Executive Officer
Bank of America
100 N. Tryon Street
Mail Code NC-1-007-18-01
Charlotte, NC 28255 March 5, 2010

Dear Mr. Moynihan:

I am writing to call your attention to a serious breakdown in the management oversight at Bank of America, a breakdown that involves one division of the company working against another.

This issue is detrimental to the interests of your shareholders -- and in addition, is a troubling example of how financial institutions can engage in socially irresponsible practices that promote home foreclosures.

In this case, the foreclosure that is being forced will result in a loss of revenue to the bank and to the underlying investor in the loan. Unfortunately, this is the second time I've written to you about this matter. After I first contacted you on January 7, the matter was taken up by the customer service team in the office of the CEO, and appeared to be on the route to be equitably resolved. Today I learned that these efforts to resolve the matter have been undone.

The situation, specifically, is this:

-- I have a contract to buy a house that is destined to be foreclosed. Bank of America is the servicer of the first mortgage. The short sale is at appraised market, and Bank of America has approved the short sale.
-- A division of Bank of America, FIA Card Services, has placed a lien on the house for an unpaid balance by the current owner.
-- In order to close on the house, I have requested a lien discharge from FIA Card Services. After I first contacted you, a representative of FIA, and a representative from the executive offices, stated to me and my attorney that if we were able to obtain lien discharges from the other lien holders on the property, that Bank of America would release the lien or at the very least accept the same terms offered to the other lien holders. We have obtained lien discharges from the IRS, NY State, Allpoints Capital and GMAC (servicer of the second mortgage). However, when we contacted the credit card division yesterday, we were told that the debt has been placed "with an outside agency."
-- We had taken it on good faith that Bank of America would honor the agreement made by the credit card division and others at BofA, and we have invested a good deal of our resources to satisfy the bank's requirements for a discharge of the lien. It appears that the bank has abrogated that agreement.

It is widely acknowledged that foreclosures promote neighborhood deterioration and further destroy home values. It is national policy to work to prevent foreclosure, and I'm sure it is the publicly stated position of the Bank of America that foreclosure should be averted if possible. I hope you will help me resolve this matter in a way that will best serve both your shareholders and the public interest.

I have written to you in hope that your office can intervene constructively in the case. I would prefer to resolve this by working cooperatively with Bank of America, rather than to escalate my grievance.

HAIL TO THE IRS!

You would never think that the IRS would be one of the good guys in this story.

Playing against type, they've been gentlemanly, open, responsive.

New York State has also been easy to deal with.

Why are the private sector bureaucracies we are dealing with so poorly run? I guess executive compensation takes priority over investing in the people and resources necessary to provide decent customer service.

By the way, many people seem surprised when you tell them that it is possible to get the IRS to discharge a lien in a short sale. This is thanks to the agency's scintillating Publication 783. Don't forget to send you request for tax lien discharge to the right IRS office! For that info, I recommend IRS publication 4235.