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Bank of America (BAC) Sued For Over $1 Billion By US For Mortgage Fraud

by Paul Wilson |
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Thursday, Oct 25, 2012
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Warning: mysqli_query(): (HY000/1194): Table 'wp_options' is marked as crashed and should be repaired in /home/usastock/public_html/wp-includes/wp-db.php on line 1942
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class="post-10842 post type-post status-publish format-standard has-post-thumbnail hentry category-business tag-bac tag-bank-of-america tag-bank-of-america-corporation tag-countrywide tag-countrywide-financial-corporation tag-fannie-mae tag-federal-home-loan-mortgage-corporation tag-federal-national-mortgage-association tag-freddie-mac tag-mortgage-fraud tag-nysebac tag-preet-bharara tag-the-hustle tag-united-states-attorney tag-us-attorney">

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Bank of America Corporation (NYSE:BAC) is being sued for over $1 billion from losses arising from fraudulent and otherwise defective loans sold to the Federal National Mortgage Association (OTCBB:FNMA) and the Federal Home Loan Mortgage Corporation (OTCBB:FMCC), better known as Fannie Mae and Freddie Mac, respectively.

The civil lawsuit, brought by Preet Bharara, the United States Attorney for the Southern District of New York, was announced on Wednesday. The complaint also covers Countrywide Financial Corporation and an affiliate which were purchased by Bank of America in 2008.

According to the announcement, Countrywide implemented a streamlined loan origination process which eliminated quality controls, and incentivized employees to cut corners and conceal defects. Countrywide management, in spite of being aware that the company’s origination process itself did not meet required standards – and that there were increasing levels of fraud and other serious defects among the loans the process was generating – sold these loans to Fannie Mae and Freddie Mac with full representations as to their quality. Later the company paid bonuses to its quality control personnel to “rebut” defects that they became aware of.

Allegedly Bank of America knowingly allowed these practices to continue after it acquired Countryside, did not notify Fannie Mae and Freddie Mac of problem loans and resisted buying back many of the loans – despite evidence of fraud, misrepresentation and other obvious violations of Fannie Mae and Freddie Mac requirements. These practices continued even after Bank of America had received $45 billion in TARP funds from taxpayers.

The U.S. Attorney called these “reckless mortgage practices” that were “spectacularly brazen in scope”.

Whether intentional or not, Countrywide labeled the loan origination process with the rather (at least in hindsight) satirical or mocking name of “the Hustle” (or “HSSL,” for “High-Speed Swim Lane”).

As noted above, Fannie Mae and Freddie Mac suffered over $1 billion in losses from these loans. The complaint seeks treble damages along with civil penalties prescribed by several federal laws.


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