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Camo-Washing: To the Banks, What’s Good for Military Families Isn’t Good for Everyone Else

I have a piece in The American Prospect on “camo-washing”, the practice of the banks to boost their public image by taking care of wrongful military foreclosures and violations of the Servicemembers Civil Relief Act, while ignoring the much larger foreclosure crisis with their civilian borrowers. This is something I’ve been writing about here for a while. Here’s an excerpt:

And Bank of America’s program for military personnel reduces principal to 100% of the current market rate. This is particularly notable, since just a day before instituting the program, Bank of America CEO Brian Moynihan rejected principal reductions for the bank’s underwater borrowers, calling them “unworkable” and unfair. Moynihan stated, “There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference.”

Yet that’s what the entire mortgage industry is doing. And the reason for it is simple. The banks know that the military is one of the only widely respected institutions left in the country, and well-publicized instances of abuse of service members will cause a far bigger backlash than they have experienced to this point. What’s more, evidence of wrongful foreclosures on the military will lead to further scrutiny of their actions with other borrowers.

This is what you could call “camo-washing,” similar to the greenwashing that corporations employ to create an appearance of attentiveness to environmental issues. The banks bend over backwards for the benefit of members of the military they have wronged, to distract from the fact that they’re not doing the same for millions of others. It also works to enhance their public image, positioning them as sympathetic and responsible, willing to make good when they screw up.

I go on to cite a case in Milwaukee that puts the lie to claims from the OCC about no wrongful foreclosures outside of these SCRA violations. In this case, a borrower, ironically an ex-Marine, has made every single mortgage payment on time, but still faces eviction because his refinancing company just never paid off the original mortgage, leaving the borrower in default on it. This sloppiness and inattention to detail characterizes much of foreclosure fraud.

Since I wrote this article, we’ve learned that Bank of America, the same firm mentioned above, the one reducing principal for military personnel, is pressing individual states to blow up the state AG settlement.

Bank of America Corp. (BAC) was accused by a top official at the Iowa attorney general’s office of engaging in a divide-and-conquer strategy by undermining support for the settlement of a nationwide probe into foreclosure practices, a person familiar with the matter said.

The bank tried to get attorneys general to break away from those supporting the proposed accord, Iowa Assistant Attorney General Patrick Madigan said during a recent conference call, according to the person. A second person familiar with the settlement talks said the bank sought to sow dissent among the states, eight of which have publicly criticized the proposal’s terms. Both people asked not to be identified because the talks are private. Madigan declined to comment […]

Madigan, who was giving an update to state officials, said the largest U.S. lender by assets was taking a “divide-and- conquer” approach in a bid to disrupt negotiations, according to the person on the call. Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, declined to comment.

To be honest, it wouldn’t take much to get some states to split off; it’s already happened without much of a push from BofA. Many of the new Republican AGs who entered office after the investigation began just don’t want any part of the deal.

Bank of America and the other big banks will have to shift their lobbying efforts to Arkansas. There, a new law signed on March 31 requires mortgage servicers to “provide homeowners with copies of the note, mortgage and any assignments, along with the physical location of the note and payment history, to any homeowner before initiating a foreclosure on their home.” Chain of title bills like this have been moving through several state legislatures, but this is the first one where it’s been signed into law. Can’t wait to see how the banks react to that one. Maybe with some more camo-washing.

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David Dayen

David Dayen

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