Black and Wray Part 2 of Response

The full piece is here.  Some excerpts:

The fraud scheme inherently strips homeowners of their life savings and finally their homes. It is inevitable that the homeowners would become delinquent; that was the inherent consequence of inducing those who could not repay their loans to borrow large sums and purchase homes at grossly inflated prices supported by fraudulent inflated appraisals. This was not an accident, but rather the product of those who designed the “exploding rate” mortgages. Those mortgages’ initial “teaser rates” induce unsophisticated borrowers to purchase homes whose values were inflated by appraisal fraud (which is generated by the lenders and their agents) and those initial teaser rates delay the inevitable defaults (allowing the banks’ senior managers to obtain massive bonuses for many years based on the fictional income). Soon after the bubble stalls, however, the interest rate the purchasers must pay explodes and the inevitable wave of defaults strikes. Delinquency, default, foreclosure, and the destruction of entire neighborhoods are the four horsemen that always ride together to wreak havoc in the wake of epidemics of mortgage fraud by lenders.

Given the fact that we have obtained B of A’s attention (and that of the some administration officials), we ask the following questions that the public needs to make intelligent policy decisions.

  • Has Bank of America conducted a review of the bank’s assets that AMBAC reviewed and found a 97 percent rate of false reps and warranties?
  • If so, who conducted the review, and what rate of false reps and warranties did they find? Does Bank of America agree that liar’s loans have extremely high fraud rates?
  • Does Bank of America agree that an honest secured lender would never seek to inflate an appraisal?
  • Does Bank of America agree that a competent, honest secured lender would prevent others from frequently inflating appraised values?
  • Does Bank of America agree that appropriate home mortgage underwriting can minimize adverse selection and produce a positive expected value to home lending?
  • How many fraudulent mortgage loans made by Countrywide has Bank of America identified?
  • What is Bank of America’s procedure when it finds suspicious evidence of a fraudulent loan?
  • How many fraudulent mortgage loans, by year, since 2000, have Countrywide and Bank of America identified.
  • How many suspicious activity reports (SARs) did Bank of America file concerning mortgage fraud, by year, for the period 2000-to date? What are the position titles of the three most senior Bank of America managers that were a subject of the SARs filed by the bank?
  • How many SARs did Countrywide file, by year, for the period 2000 on?
  • How many mortgage loans or securities did Countrywide and Bank of America sell under false reps and warranties?
  • What was the allowance for loan and lease losses (ALLL) (aggregate amount and relevant ratios) provided by Countrywide and by Bank of America, each year from 2000 on for mortgages and mortgage securities? If it varied by type of mortgage provide the ALLL for each type.
  • Which years does Bank of America consider Countrywide’s ALLL to be adequate?
  • Has Bank of America reviewed Countrywide’s nonprime loans for fraud incidence, fraud losses, and the incidence of lender fraud and fraud by the lender’s agents? Please provide the results.
  • What has Bank of America done to remedy the injuries that borrowers suffered through loan or foreclosure fraud by them or Countrywide?
  • Does Bank of America agree that Countrywide’s nonprime lending was often conducted in a manner that was unsafe and unsound?
  • Does Bank of America agree that Countrywide’s record keeping was not adequate and required substantial improvement?
  • At current market value of its assets, just how insolvent is Bank of America
  • How much can the bank sell its toxic assets for in today’s market?
  • What is the value of mortgages and mortgage backed securities held by Bank of America for which it has no clear title?
  • How many MBSs has the bank sold to investors for which it does not hold the notes that are required?
  • What is the bank’s current estimate of losses it will suffer in court due to lawsuits by investors?
  • The top four banks are holding434 billion in second liens (good only if the first lien — the mortgage — is paid), and carrying these on their books at 90% of face value. What are Bank of America’s reasonably expected losses on second liens against properties that are delinquent, in foreclosure, or likely to go into foreclosure?
  • How large a sample of subprime and liar’s loans did BofA’s due diligence team review?
  • What likely mortgage fraud incidence did BofA’s due diligence team discover? What did they report to BofA with regard to fraud incidence? What changes in lending and personnel did BofA implement in response to these findings?
  • Bank of America has not responded to Bill Black’s prior requests that it terminate the services of its openly racist chief advisor in Germany: Hans-Olaf Henkel. We request a response.
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