Bank of America, Wells Fargo and Home Mortgages, Essay Example

Bank of America and Wells Fargo have been accused of deceit and fraud by using an electronic mortgage registry that didn’t only put the homeowners at a disadvantage but also violated certain state’s regulations across the country. The electronic registry in question is called the Mortgage Electronic Registration Systems or MERS. According to New York Attorney General Eric Schneiderman, MERS makes it difficult for homeowners to track property transfers as could be done through traditional public records which the system replaced. Schneiderman also claims that the data in the electronic system is plagued by inaccuracies and proper document preparation and execution methods were ignored. Banks such as Bank of America and Wells Fargo allegedly carried out foreclosures proceedings on deceptive and fraudulent court submissions and violated homeowners’ basic legal rights (Gormley).

MERS was owned by the banks and was initially created to sell individual mortgages to the investors through the saucerization process. When the housing market busted, the banks used MERS to carry out foreclosure proceedings but MERS data was not publicly available and contained inaccurate data (Walsh). This is another example of how financial innovation leads to greed and unethical practices because banks are focused on the short term gains. The banks did save $2 billion by using MERS but will mostly probably lose more as most of the states have filed lawsuits against them. This example also shows that technology continues to make regulators’ jobs more difficult because it takes time to understand the nature of new financial instruments. The banks tried to automate foreclosure processes in order to improve operating efficiency but they didn’t take steps to ensure that all legal obligations are also observed.

References

Gormley, Michael. Mortgage fraud unit co-chair sues biggest banks. 3 February 2012. 20 April 2012 <http://www.usatoday.com/money/economy/housing/story/2012-02-03/mers-foreclosure-fraud-lawsuit/52950440/1>.

Walsh, Ben. NY Attorney General Launches Major Mortgage Fraud Suit Against Bank Of America, JPMorgan And Wells Fargo. 3 February 2012. 20 April 2012 <http://articles.businessinsider.com/2012-02-03/wall_street/31020087_1_jpmorgan-and-wells-fargo-foreclosure-proceedings-mortgages>.