There is some hope coming out of Helena.
On Friday, a state House committee killed a bill that would have provided continuing cover for some of the worst banking fraud in American history.
It seems unlikely that Senate Bill 280 will survive its death in committee, but in Helena you just never know. So let’s review why this bill is so bad just in case an attempt is made to revive it.
Proposed by Sen. Eric Moore, R-Miles City, the bill would have changed state law to specify that lawsuits based on alleged lending fraud could not be filed over violations involving oral agreements, only agreements made in writing.
The law was a direct response to a Montana Supreme Court ruling in favor of Abraham and Betty Morrow of White Sulphur Springs, whose years-long ordeal with fraudsters at the Bank of America, which nearly cost them their retirement home, we chronicled last year.
The Morrows sued Bank of America in 2011, and in 2013 a Lewis and Clark County District Court judge granted summary judgment to the bank, saying the Morrows could not enforce an oral agreement to modify their loan. Only written agreements could form the basis of a lawsuit, the judge ruled.
The Montana Supreme Court saw the gross shortcomings of that logic and overturned the ruling last year.
The high court ruling said, in part, that “the rule requiring written contracts in certain cases … exists to prevent fraud and should not be used as a defense by those who have allegedly committed fraud.”
Exactly, which is why SB 280 deserves to stay dead. Moore, the bill sponsor, has said in news stories and an op-ed piece in the Gazette that the ruling would discourage banks from discussing loans with their clients, prevent them from telling people what their options are if they need loan modifications.
That is a tortured reading of the Supreme Court opinion. The Morrow case was not about bankers giving advice or discussing options. It was about intentionally misleading the Morrows into believing that they were being allowed to make reduced payments or even to skip some, then using those instances to say they had defaulted on their loan.
And of course, all the loan modification “agreements” were made over the phone. The Morrows said that over time they spoke with approximately 40 Bank of America representatives. A clincher in their case was Bank of America’s assertion that the Morrows were wrong when they said one of their earliest conversations was with a representative named “Brian.”
Their records showed no such conversations, the bank said. But the Morrows’ lawyers eventually deposed a Bank of America representative in India, a fellow by the name of Sunil Kumar, who had spoken with the Morrows. He admitted that he and his fellow reps all used American names. His was “Brian.”
We are not talking about friendly neighborhood bankers in Miles City giving reasonable advice to their hard-working clients. We’re talking about huge banks buying loans from other, smaller banks and deliberately leading clients into foreclosure, from which the banks reaped endless profits.
Some defenders of Moore’s legislation have tried to shift the blame, saying the so-called mortgage crisis was caused by Democratic policies that loosened up lending practices and lured unqualified borrowers into homeownership.
Consider the Morrows again. There were successful entrepreneurs, but the people they sold their South Carolina business to ran it into the ground and the Morrows, in trying to revive it, got into a short-term financial jam.
They were just the kind of customers a good, local bank would have bent over backward trying to help. Bank of America did everything it could to force them into foreclosure.
If you need any other reason to oppose this bill, just read Gazette reporter Tom Lutey’s story from last week.
It contained what is likely to go down as the most memorable quote of the 2015 legislative session. It was spoken by attorney Kenneth Lay, who represented Bank of America in the Morrow case before the Supreme Court, and in cases against other Montana homeowners.
Lutey asked Lay why, when he testified in favor of Moore’s bill in front of a Senate committee, he didn’t disclose his relationship with Bank of America, instead introducing himself only as a “Helena lawyer.”
Lay responded: “You need to shut up, dude. I’m not interested in answering any of your questions.”
So that’s the kind of classy person the Bank of America enlists when it is trying to defend its disreputable treatment of our fellow Montanans. We can only hope that some of the legislators who voted to kill Moore’s bill did so partly because they were offended by Lay’s rude eruption. And we can only hope that if the bill is somehow resurrected, Lay continues to lobby for it.
We could tell him, in his own terms, “Dude, you need to keep talking.”