Scandal enveloped multiple Wall Street megabanks in 2010 when it was discovered that throughout the housing bust and the foreclosure crisis that ensued, the nation’s largest banks were caught robo-signing — the practice of approving foreclosures without verifying mortgage information and fabricating other loan documents. At the time, the banks promised to end the practice and attempted to escape blame by tying the scandal to low-level employees.
In reality, bank managers knew about the potentially illegal and fraudulent practices and in some cases directed them, according to a report by the inspector general of the Department of Housing and Urban Development. At Bank of America, Wells Fargo, and other banks, documents were rarely verified, and even when employees raised concerns they were told by management to proceed, the New York Times reports:
At Wells Fargo, now the nation’s largest mortgage servicer and originator, employees told the inspector general’s office that the company’s management had assigned them bogus titles, including “vice president of loan documentation,” even though they had no training in document review. Before becoming vice president, one employee worked at a pizza restaurant. [...]
As at Wells Fargo, employees at JPMorgan Chase took on titles like “vice president of Chase Home” even though “the titles were given by Chase for the sole purpose of allowing individuals to sign documents and came with no other duties or authority.”
There were other indications that management knew about the practices. At Bank of America, employees raised concerns but were told by management to proceed; Wells Fargo squashed a study into foreclosure practices and told the employee conducting the study to continue signing documents without reading or verifying data; and Citigroup management admitted that the bank regularly signed foreclosure documents without verification, even as the bank was telling regulators that internal reviews found its practices to be sound. Despite promises to stop when the scandal broke, banks continued robo-signing for at least another year.
The IG report falls in line with recent accounts provided by former Wall Street employees and whistleblowers. A Bank of America whistleblower last week said the bank had intentionally prevented homeowners from getting federal mortgage help, and a former JPMorgan employee told Reuters in November that exploiting consumers was “the purpose of the banking industry.” An investigation into 400 San Francisco-area foreclosure cases, meanwhile, found that nearly every one of them had potential legal issues.
“I believe the reports we just released will leave the reader asking one question — how could so many people have participated in this misconduct?” HUD Inspector General David Montoya said in a statement. “The answer — simple greed.”