Pipeline

Man in the Mirror

Lenders generally don't like to end up becoming landlords. But in the case of a Boynton Beach, Fla., office building that Bank of America Corp. is foreclosing on, the bank can at least take comfort in the fact that it knows the main tenant quite well.

A B of A branch is the main tenant in the 21,552-square-foot suburban building. According to a story in the South Florida Business Journal, the Charlotte bank filed a foreclosure suit last month to take over the building, whose $7.5 million mortgage was modified in 2007.

Jefferson George, a spokesman for B of A, would not discuss the situation.

According to a listing on the real estate site LoopNet, 18,000 square feet in the building are available for lease, with an asking rent of $23.33 per square foot.

The building is "minutes from I-95 and the beaches," the listing says.

In a prolonged real estate downturn, something like this was bound to happen to a bank with the second-largest branch network and the second-largest portfolio of commercial real estate loans.

But it raises a natural question, posed by a commenter on the Business Journal's website: "Does the branch get free rent now?"

Penny-Wise, But …

For less than $200 up front, Bank of America and Morgan Stanley might have saved themselves a combined $22 million, and a whole lot of embarrassment.

Last week, B of A agreed to pay $20 million and Morgan Stanley $2.35 million for improperly foreclosing on members of the military — some of whom were on active duty in Iraq and Afghanistan — under a settlement with the Justice Department.

The Servicemembers Civil Relief Act of 2003 bars lenders from foreclosing on active-duty military members.

Scott Stoddard, the chief executive of Quandis Inc., a software company in Foothill Ranch, Calif., said that for three years he has offered a service that checks whether a borrower facing foreclosure is in the military. But few servicers signed up until Congress hauled JPMorgan Chase & Co. executives to testify in February about wrongful foreclosures of servicemembers.

A search of Justice Department records costs just 10 to 20 cents, Stoddard said. He suggested that servicers check four times: before a foreclosure review, before referral to an attorney, before the first legal action and five days before a foreclosure sale.

The Justice Department's complaints against Countrywide Home Loans Servicing LP, a unit of Bank of America, and Morgan Stanley's Saxon Mortgage Services Inc. allege the companies did not consistently check the military status of borrowers who were foreclosed on through May or June 2009.

"It would have cost just $1 [per borrower] for servicers to find out whether the 177 service members whose homes they took in foreclosure were actually out fighting for our country," Stoddard said.