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Bank of America Leak is No Smoking Gun, but the Corpse is Still Dead

Dishing dirt on Bank of America (BAC) these days is like catching Charlie Sheen acting crazy: Been there, done that. Internal B of A emails disclosed today by a hacker group known as "Anonymous" and purportedly showing that the financial company committed mortgage fraud actually show nothing of the sort. Says Business Insider's Courtney Comstock:

The subject of the Anonymous leak sounded a lot more damning than the emails turned out to be....

The Anonymous source says he has more and vehemently claims that fraud occurred. If it did, we can't wait to see documents that prove it.

Fair enough. On the other hand, what further proof do we need that B of A is dishonest? Along with other big loan servicers, the company already admitted illegally "robo-signing" foreclosure paperwork affecting thousands of homeowners. It has wrongly repossessed people's homes, and employed shake-down artists like Florida lawyer David Stern to do it. Legal officials in Arizona and Nevada have filed lawsuits against the firm accusing it of fraud. As Nevada attorney general Catherine Cortez Masto said in charging B of A with deceiving homeowners:
We are holding Bank of America accountable for misleading and deceiving consumers. Nevadans who were trying desperately to save their homes were unable to get truthful information in order to make critical life decisions.
Separately, B of A and other Wall Street banks defrauded states, cities and towns by conspiring to rig bids for municipal bond derivatives.

Beware "force-placed" insurance
B of A denies that the leaked documents reveal any improper activity on its part, or that the emails even relate to foreclosures. The messages appear to come from a former employee of Balboa Insurance, which the company acquired when it bought mortgage lender Countrywide in 2008 (B of A has since sold Balboa). The person claims that B of A deceived customers in arranging so-called "force-placed" insurance for mortgage holders who lack home loan protection or whose policies have lapsed.

Banks like writing such policies because it's far more expensive than regular insurance. For homeowners who are struggling to pay the mortgage, however, the added burden can force them into foreclosure, which also hurts investors in mortgage-backed securities. Consumer advocates have long complained about the use of force-placed insurance, and there's reason to think the problem is widespread. Reports American Banker:

Evidence of abuses and self-dealing in the force-placed insurance industry suggests that there may be far larger problems in how servicers are handling distressed loans than the sloppy document recording that has been the recent focus of industry woes....
"There's no arm's-length transaction here, and that creates all sorts of incentives for the servicer to force-place excessive insurance and overcharge consumers for policies that provide minimal benefit," said Diane Thompson, of counsel for the National Consumer Law Center. "Servicers and insurers have turned this into a gravy train."
Indeed they have. And if the leaked B of A emails prove that the company was, say, deliberately allowing borrowers' homeowner insurance to expire so it could place them into a pricey policy, that should be stopped. It also would be interesting to learn if the company was changing loan tracking numbers to make it easier to complete foreclosures, as the hackers allege.

For now, it's not clear what the messages show. At worst, though, they would only confirm the obvious -- that B of A and other large loan servicers used a range of unethical or outright illegal practices to bilk customers before hustling them out of their homes. Stop the presses!

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