Citing complaints about Bank of America’s performance in the wake of the housing crisis, Councilman Steve Kornell wants the city to stop doing business with the bank.
The city, which has a nearly $475 million operating budget, banks with and uses credit cards issued by Bank of America, and one of its contracts with the bank is up at the end of April. Before the council votes to renew it, Kornell wants to consider taking the city’s business elsewhere. Among his reasons are residents’ complaints about the bank’s failure to comply with provisions of a 2012 foreclosure settlement.
“The city shouldn’t do business with banks that are actively contributing to our foreclosure crisis,” Kornell said.
Many of the complaints concern dual tracking, when a bank forecloses on a property despite a customer’s attempts at loan modification. Customers are also complaining about having to deal with multiple people when they call the bank, rather than dealing with a single point of contact.
Both are required under a 2012 settlement over a lawsuit against five major mortgage lenders filed by 49 state attorneys general and the federal government.
“Let’s not reward people who are violating the settlement,” he said.
The settlement also imposes a hefty fine on each of the banks and sets aside money to help consumers avoid foreclosure.
The banks’ dealing with current cases has caught the eye of the man who serves as the watchdog on their compliance.
“As I travel around the nation to meet with consumers and advocates who work on their behalf, I continue to hear complaints about compliance with the settlement by each of the five banks,” wrote Joe Smith, the monitor of the national mortgage settlement, in an email.
Not everyone agrees. Deborah Scanlan, director of St. Petersburg-based Neighborhood Home Solutions, a nonprofit that advocates on behalf of consumers in foreclosure, said since the settlement, compliance doesn’t appear to be an issue.
“We are seeing a single point of contact, and that decreases dual tracking,” she said, but that there are no stats specific to any bank.
Kornell’s proposal isn’t the first of its kind. It’s a road that cities like Austin, Texas, Portland, Ore. and Kansas City, Mo. have already gone down. The idea was initially pushed by progressives and the Occupy movement as a means of punishing banks that engage in predatory lending practices like “robosigning” and intentionally lending to consumers not likely to keep paying their mortgages. But the move to divest has for some cities, especially St. Petersburg, become a pocketbook issue.
“We spend more than $600,000 a year” maintaining foreclosed properties that have been abandoned, said St. Petersburg City Council chair Karl Nurse. “Cutting lawns, boarding up houses, and continuing to reboard them.”
The city also tries to prevent foreclosures through counseling and workshops, and plans on launching a registry for the city’s 5,000 homes currently undergoing the process.
Nurse said at a preliminary discussion last Thursday there appeared to be majority support on the council for exploring potential divestment. The council is expected to discuss it at this Thursday’s meeting, and may schedule a workshop on the matter.
“I’m going to try to delay awarding the contract until there’s a workshop,” Kornell said.
Largo-based foreclosure defense lawyer Ben Hillard said while it may be true that banks are not fully complying with the terms of the settlement – not that there’s any way to know. He said the $8 billion slated for the state won’t cover all of its eligible cases, so the banks will likely comply with some borrowers more so than others – especially borrowers whose challenges are likely to make the bank rack up excessive legal fees.
“If I’m the bank, I’m going to try to comply with the settlement so I don’t get dinged any further,” he said.
Anyhow, he said, they’re not likely to feel anything from a community’s divestment.
“The banks are so huge,” he said. “That’s probably meaningless to them. I would suggest they don’t give a crap.”
The other four lenders subject to the settlement in light of foreclosure abuses are Ally/GMAC, Citi, JP Morgan Chase and Wells Fargo. The settlement, bigger than the 1998 tobacco settlement, required the five banks to pay a total of $25 billion to federal and state governments as well as certain borrowers.
A city’s operating funds and the revenue they can generate for a major bank might be small potatoes compared to the kind of money these institutions have on their hands. Still, advocates say divestment – even if only symbolic – is key.
“I absolutely agree,” said Sylvia Landis, a Hillsborough County-based foreclosure activist. “They have violated every settlement term that’s ever been come up with.”