7 Public Pension Funds Challenge Banks on Fundamentally Flawed Foreclosure Processes


Contact: Sharon Lee / Matthew Sweeney, (212) 669-3747 January 9, 2011

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NEW YORK, NY – A coalition of seven major public pension systems called on the boards of directors of Bank of America (NYSE: BAC), Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) to immediately undertake independent examinations of the banks’ mortgage and foreclosure practices.

Led by New York City Comptroller John C. Liu on behalf of the five NYC Pension Funds, the coalition also includes the Connecticut Retirement Plans and Trust Funds, the Illinois State Board of Investment, the Illinois State Universities Retirement System, the New York State Common Retirement Fund, the North Carolina Retirement Systems, and the Oregon Public Employees Retirement Fund.

The coalition of pension funds called for the banks’ Audit Committees to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures.

“This will help to prevent future compliance failures and restore the confidence of shareholders, regulators, legislators and mortgage markets participants,” the coalition advised in its letter.

The coalition members’ insistence on immediate action reflects the urgency of their concerns over mishandled mortgages.  In November, the New York City Pension Funds and Comptroller Liu made a similar request for bank boards to conduct independent policy reviews as part of a shareholder proposal to the banks’ annual meetings in the spring.

“The banks’ boards cannot continue to pretend the foreclosure mess is the result of technical glitches and paperwork errors,” Comptroller Liu said.  “There is a fundamental problem in their procedures that endangers not just homeowners, but shareholders, and local economies.  Given the risks involved, only a swift and unbiased audit can reassure shareholders that the pension funds of 700,000 working and retired New Yorkers are in safe hands.  The boards of directors have no time to waste.”

The coalition represents more than $430 billion in pension fund investments, including $5.7 billion invested in the four banks.

“We don’t know exactly what the banks were doing, and we don’t know if they did it right,”New York State Comptroller Thomas P. DiNapoli said.  “Millions of families have lost their homes, and the investments of the million members of the Common Retirement System have been put at risk.  As investors, we need to understand what happened.  A full and open examination of the procedures used to foreclose on millions of families is the only way to make sure our investments are protected and no one is ever wrongfully evicted from their home.”

Federal Reserve Governor Daniel K. Tarullo testified to the Senate Banking Committee on December 1 that the Federal Reserve’s preliminary findings on bank foreclosure procedures suggested “significant weaknesses in risk-management, quality control, audit and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation.”

The Congressional Oversight Panel has estimated that banks’ potential mortgage liability could total $52 billion, borne largely by the four banks contacted by the pension funds.  The Panel’s November 16 report, “Examining the Consequences of Mortgage Irregularities for Financial Stability and Foreclosure Mitigation,” concluded that banks’ could suffer “disabling damage” if they were found to have misrepresented the quality of loans sold for securitization and forced to reabsorb billions in troubled loans.

“The responsibility for making sure that internal controls and compliance process are in place for mortgage and foreclosure practices rests squarely with these Audit Committees,” said North Carolina State Treasurer Janet Cowell.  “The recent testimonies and studies strongly suggest the need for these Audit Committees to act swiftly and objectively in conducting an independent and comprehensive review of these practices.”

The coalition of pension funds called for the banks to report the findings of their independent examinations in their 2011 proxy statements this spring. As of December 31, 2010, the coalition’s combined holdings in each bank included: 97.1 million Bank of America shares valued at $1.3 billion; 226.6 million Citigroup shares valued at $1.1 billion; 40.7 million JPMorgan Chase shares valued at $1.7 billion; and 50.6 million Wells Fargo shares valued at $1.6 billion.

The New York City Comptroller serves as the investment advisor to, custodian and trustee of the New York City Pension Funds.  The New York City Pension Funds are comprised of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System.  The New York City Pension Funds hold a combined 138,786,887 total shares in Bank of America Corporation (NYSE: BAC), Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM), and Wells Fargo & Company (NYSE: WFC) for a combined asset value of $1,933,160,319 as of 12/31/2010.

The coalition’s letters to each bank are available on Comptroller Liu’s website:



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