While nonjudicial foreclosure laws are not known for their excessive generosity, Hawaii's is particularly draconian. In the Aloha State, it's possible for homeowners to have their houses foreclosed on and sold for much less than their full value worth, without ever realizing the foreclosure is underway.
The law dates to 1874 and its abusiveness is rooted ineffort to take land from native Hawaiians. Legislators have repeatedly tried to get the law changed, but they never seem to succeed.
Banks Versus Legislation
One reason for this legislative inaction might be the effectiveness of the bank lobby. According to Netra Halperin, who works for a Hawaii legislator, and herself ran unsuccessfully for office last year, two representatives of Bank of America (BAC) recently met with her. In her account of the meeting, which I've excerpted below, BoA's workers offered a state legislator special access to its mortgage department. I'm omitting the legislator's name because only Ms. Halperin was present at the conversation and she is speaking for herself, not for the legislator.
The quotes are to the best of Halperin's recollection, and represent only the relevant part of a longer conversation:
On about 5:30 p.m., Wednesday, March, Marvin Dang, Attorney for Hawaii Financial Services Association and David Swartley, Senior V.P., Regional Manager, Pacific Northwest, State and Local Government Relations, Bank of America, walked into our office in the capitol.
Swartley: "Bank of America is offering a special hot line to the Bank President for legislators, their staff, their families and constituents who need help with their Bank of America mortgages. It is the same number that we give to congresspeople and their families and aides. The line goes directly to the president's office, though they wouldn't be speaking directly with the president."
Halperin: "I also work for an attorney, James Fosbinder, who defends homeowners from mortgage foreclosure. Can I also give our clients this hot line number?
Swartley: "No, it is only for legislators and their staff, and family -- and constituents."
Halperin "Is that ethical?"
Swartley: "I think it's transparent. It is what it is."
Dang: "Let me explain it to you this way: I used to be a legislator. Constituents would call me about things like potholes. Even though it wasn't my responsibility I would send them to someone who could help them. People only call legislators if their problem is very serious. Our goal is to help legislators, to take the heat from constituents off of them."
Halperin later told me that Swartley claimed that he was visiting Hawaii because of a proposed law, which she assumed was HB894, a bill that would place a five-month moratorium on non-judicial foreclosures. She gave me a copy of the letter that BofA gave her with its special phone number, a copy of the letter announcing the lobbying visit, and later told me that Representative Robert Herkes, Chair of Commerce and Consumer Protection Committee, told the House that BoA spoke to all 76 of Hawaii's state legislators.
To get a better understanding of the situation, I contacted BoA and discussed the letter with spokeswoman Jumana Bauwens, who acknowledged that Swartley had, indeed, visited Hawaii. Noting the bank's "outreach efforts," she also sent a pair of press releases outlining BoA's attempts to work with borrowers.
According to Bauwens, Swartley's visit was intended to "enhance the communication channels with the legislators and other public officials," provide an "update on Bank of America's focus on distressed borrowers and outreach initiatives" and generate "feedback on the geographical areas that we need to focus on during our outreach efforts in April." She also said the phone number "is not unique to Hawaii, it is simply a line designed to help public officials better handle constituent complaints that come their way."
In short, Bank of America confirmed Halperin's story: It is empowering legislators with the seemingly godlike power to get BofA to fix a homeowner's mortgage modification. But in order to preserve the godlike nature of that power, no one else can have access to the number, not even people who most need it -- like lawyers representing people struggling to get modification problems with the bank solved. It's worth noting BoA's press releases didn't say anything about the special hot line number.
Fixing Problems or Currying Favor?
If BofA was really concerned about modifying mortgages, it wouldn't give legislators a special hot line to the president's office. To make it easier for people to modify mortgages, BofA could overhaul its current process. One model would be a process in the settlement the state attorneys general and others recently offered the banks to resolve their illegal and abusive mortgage and foreclosure practices. The proposal would require servicers to set up an easy way for borrowers to submit their documentation electronically, short-circuiting the seemingly endless resubmit documents loop, and mandate responsive time frames to get the borrowers consistent, reliable answers quickly.
Indeed, the initiatives in the settlementproposal far surpass the PR-heavy, questionable outreach efforts in the press release Bauwens sent. Consider the experience of Martin Galvan at a JPMorgan Chase outreach effort at the Los Angeles airport. According to Galvan, the Chase counselor told him that, with all the modification programs, "We don't know what we're doing right now." Obviously, this isn't quite as useful as a hot line to the president's office.
Not For The Public
Indeed, the letter that BofA sent to the legislators was very explicit that the line of communication had to come through the legislators' offices, not directly from the homeowners, emphasizing that "In order to maintain our service commitment to you, it is critically important that the e-mail and phone contacts that are being provided to your staff not be provided to the general public." [bold and italics in the original.]
In her explanation of the Hawaii visit, Bauwens noted that BofA also has phone lines dedicated to "housing counselors, private attorneys and community groups." But if the lines were a priority, one might have expected Swartley to say something like: "Ms. Halperin, while you can't give this number to the foreclosure defense attorney you work for, here's the dedicated line for them." Or even, "While you can't give this number to the attorney, we do have a special line for them, and I'll have some one call you back with it." Similarly, if numbers for housing counselors were so well established and distributed, it's worth asking why the proposed mortgage mess settlement had to explicitly say: "Servicer shall not discourage borrowers from working or communicating with legitimate non-profit housing counseling services."
Perhaps housing counselors, private attorneys and community groups that have received the hot line phone numbers Bauwens mentions could tell me of their experience using them. Did you get a one-business day response, a high-level review of the issues, and an expedited response? And if you're a housing counselor, private attorney or community group working with BofA borrowers on modifications and foreclosures, and you didn't get such a number, let me know that too. Be sure to let me know how to connect with you to confirm your story. If I get sufficient responses, I'll do a follow-up story reporting them.
The Difference Between Help and Lobbying
Why is this phone number such a big deal? Because at its core, this hotline and email address is about defeating borrower-friendly legislation. It's lobbying, not customer service.
By limiting access to the number, BofA is, effectively, offering to help Hawaii's legislators get re-elected, whether because they publicly offer to help constituents or because they use the special access in a targeted way, perhaps to reward campaign contributors or particularly persistent, media-savvy constituents. It's worth noting a legislator's offer to use the unpublished number to help any constituent who calls doesn't change the problematic nature of this lobbying effort. Homeowners shouldn't need their legislators to intervene in order to get their banks to play ball.
By giving this power to legislators, BofA seems to be trying to buy their gratitude. (The link is to research on the impact of small pharmaceutical company gifts to doctors on doctors' decision-making and behavior.) While it will never be known if the hot line affects a legislator's vote on important legislation, it's clear that such influence is the motivation behind the massive resources that have been dedicated to setting this number and service up for every legislator and member of Congress in the country. Or, in BofA's more delicate wording, this hot line may help to "enhance the communication channels with the legislators and other public officials."
BofA's letter to legislators concludes: "Your constituents, our customers, deserve a direct response to their concerns regarding their mortgage needs. This communication is just another effort on our part to ensure that we service their needs in an appropriate and timely fashion."
I couldn't agree more. With that in mind, here's the special hot line number and e-mail address that the company reserved for legislators (and specifically requested I not publish): 888-655-7622, email@example.com.
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