ST PETERSBURG —
Citing complaints about Bank of America’s performance in the wake of the housing crisis, city 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.
“Let’s not reward people who are violating the settlement,” Kornell said.
Many of the complaints concern dual tracking, which happens 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.
The 2012 settlement between Bank of America, four other major mortgage lenders, 49 state attorneys general and the federal government was supposed to correct those issues. It also set expectations for the level of consumer service the banks are supposed to provide.
The settlement required the banks — Bank of America, Ally/GMAC, CITI, JPMorgan Chase and Wells Fargo — to pay a total of $25 billion to federal and state governments as well as to borrowers.
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,” said an email from Joe Smith, who was appointed to monitor the national mortgage settlement.
Not everyone agrees, though. Deborah Scanlan, director of St. Petersburg’s 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.
Bank of America representatives couldn’t be reached for comment.
Kornell’s proposal isn’t the first of its kind. It’s a road that cities such as Austin, Texas, Portland, Ore., and Kansas City, Mo., have already traversed.
The idea was initially pushed by progressives and the Occupy movement as a means of punishing banks that engage in predatory lending practices.
But the move to divest has become a pocketbook issue for some cities, including St. Petersburg.
“We spend more than $600,000 a year” maintaining foreclosed properties that have been abandoned, said St. Petersburg City Council Chairman Karl Nurse. “Cutting lawns, boarding up houses and continuing to reboard them.”
The city also tries to prevent foreclosures through counseling and workshops, and it plans to launch a registry for the city’s 5,000 homes currently undergoing the process.
There appeared to be support among city council members during a preliminary discussion Thursday for exploring potential divestment, Nurse said. The council is expected to discuss it Thursday 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.
Although it may be true that banks are not fully complying with the terms of the settlement, there’s really no way to know, said Ben Hillard, a foreclosure lawyer from Largo.
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 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,” Hillard said.
Banks aren’t likely to suffer from a community’s divestment, though, Hillard said. “The banks are so huge. That’s probably meaningless to them.”