Bank of America will pay $1 billion to the U.S. largest false claims act settlement relating to mortgage fraud, states attorneys general and the federal administration announced Thursday. In the largest settlement of its kind encompassing 49 states attorneys general and the federal government, Bank of America is one of five servicers involved in defrauding hundreds of thousands of homeowners by wrongfully foreclosing on their homes. Bank of America will have to pay an additional $1 billion.
As part of the global, $26 million settlement, Bank of American will pay $1 billion to resolve the wrongdoing during the investigation, including an immediate payment of $500 million toward recovery for harm done to the Federal Housing Administration by practices conducted by Countrywide. The remaining $500 million will be deferred to fund a loan modification program for Countrywide borrowers with underwater mortgages, according to FHA.
Any remainder of the $500 million designated for loan modifications will be returned to the federal government after three years, according to the agreement.
“We are committed to protecting the FHA’s ability to provide assistance to qualified low income and first-time home-buyers, and this settlement goes a long way toward that end. It also puts lenders on notice that they will face serious financial consequences for violating their obligations under the FHA’s programs,” stated United States Attorney Loretta Lynch.
The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force.
Written by Elizabeth Ecker