U.S. Slams Bank of America With New Billion-Dollar Mortgage Suit

Bank of America was sued today for more than $1 billion in multi-year mortgage fraud against Fannie Mae and Freddie Mac. The suit follows a billion-dollar charge in October against Wells Fargo for misleading lending practices and faulty underwriting.

The loans in question were written in part under Countrywide, later acquired by Bank of America, and came through the bank’s “hustle” program, the U.S. Attorney for the Southern District of New York alleges. The new suit follows the a billion-dollar suit against Wells Fargo for FHA lending as well as a landmark $25 billion mortgage servicing settlement announced in February 2012 involving the nation’s largest mortgage lenders.

“For the sixth time in less than 18 months, this Office has been compelled to sue a major U.S. bank for reckless mortgage practices in the lead-up to the financial crisis,” said Manhattan U.S. Attorney Preet Bharara. “The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope. As alleged, through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As described, Countrywide and Bank of America systematically removed every check in favor of its own balance – they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects. These toxic products were then sold to the government sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated.”

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The suit marks the first civil suit brought by the Department of Justice concerning loans sold to Fannie or Freddie.

“To prevent fraud, conducting quality reviews and complying with underwriting standards are critical,” said Federal Housing Finance Agency Inspector General Steve Linick. “Countrywide and Bank of America allegedly engaged in fraudulent behavior that contributed to the financial crisis, which ultimately falls on the shoulders of taxpayers. This type of conduct is reprehensible and we are proud to work with our law enforcement partners to hold all parties accountable.”

Written by Elizabeth Ecker

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  • I’d like to see how the automated underwriting systems of Fannie and Freddie played into this.  I’m sure there’s more to the story, and have a hard time believing that a company as sophisticated as Countrywide committed such a fraud.  We’ll see.

    • Lance,

      Remember Bernie Madoff?  Those who looked at his credentials had a hard time believing that he would do anything like he was accused of; he was just too smart to get caught doing that.  Countrywide might be considered sophisticated but ethical or at times even legal on a civil litigation basis?  Hardly.

      Bank of America has paid out billions over the admitted illegal actions of Countrywide.  If the Countrywide actions were defensible, it would have been far wiser for Bank of America to have simply fought the issues in court but did they?

  • The damage was baked in by the media and others looking for someone to blame a few years ago.  The mortgage and reverse mortgage industries fashionably remain on the media and regulatory grill.

  • I trust your experience but still that does not explain the unexpected losses which B of A took on its stock.  The Countrywide deal did far more damage to the value B of A stock than either its own or the prior business of Merrill Lynch have come close to damaging B of A share value.

    For a company run by attorneys and CPAs, the Countrywide deal has to be the all time worst investment in US banking history.  Its losses just in the period which B of A has owned it makes Bernie’s losses look like child’s play.  And, yes, it is B of A shareholders who have had to absorb the mess all of those attorneys and CPAs created at Countrywide, not Angie and his cronies.
    So since it is investors who have eaten the losses created by Angie and Bernie how is that different?  It seems it is only because Angie used more attorneys and CPAs than Bernie.

    Where Angie did dirt even Bernie did not was with borrowers.  So where Bernie did dirt to investors and Angie did dirt to investors and borrowers, Angie is not in jail because he had the attorneys and CPAs Bernie did not.

    Is that what you are saying?

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