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Feds sue BofA for mortgage fraud

By Judy Martel · Bankrate.com
Wednesday, October 24, 2012
Posted: 3 pm ET

Federal prosecutors sued Bank of America Wednesday for more than $1 billion for mortgage fraud against the government-sponsored Fannie Mae and Freddie Mac during the worst years of the housing crisis.

The civil suit charges that, beginning in 2007, Countrywide did not ensure that borrowers could repay their mortgages. It says Countrywide then sold those defective home loans to Fannie and Freddie, which later lost money when borrowers defaulted. Bank of America bought Countrywide in 2008, and the lawsuit says the fraudulent practices continued through 2009.

In a mortgage origination program referred to as "the Hustle," the lawsuit charges that Countrywide deliberately set out to sell defective mortgages quickly to Fannie and Freddie. Hustle was the shorthand name for "High-Speed Swim Lane," a company policy that encouraged loan processors to eliminate underwriting so the lender could process and sell as many mortgages as possible.

Bank of America has not yet commented on the lawsuit, which was brought by U.S. attorney Preet Bharara in New York City, the inspector general of the Federal Housing Finance Agency, which oversees Fannie and Freddie, and the special inspector general for the Troubled Asset Relief Program, or TARP.

Fannie and Freddie guarantee mortgages for investors and rely on the banks to make sure that loans meet qualifications. According to the lawsuit, Countrywide, and later Bank of America, concealed the true quality of the loans even after they knew in early 2008 that 57 percent of such loans were defective.

This is the first civil fraud suit brought by the Justice Department on behalf of Fannie and Freddie.

Keep up with your wealth and mortgages, and follow me @JudyMartel on Twitter.

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5 Comments
Mike
October 11, 2013 at 2:30 pm

BOA has committed felony fraud with respect to foreclosure's. They send these shady law firms fraudulent papers to do their bidding , when they don't have the note to the property! The courts are not asking for proof of the claim or to see the unaltered wet signature note (the negotiable instrument they need to file the foreclosure paper work) in the court....(another fraud that they are committing against the courts)but the courts are starting to hold them accountable! I've been fighting BOA for 2 years now and I'm not going away! I've demanded to see the original unaltered wet ink note (not a certified copy those are not negotiable and probably fakes also!) that they claim to be in possession of, and to this date they have not produced nor can they produce it! It was sold on the stock market numerous time as mortgage backed securities to unsuspecting investors who don't realize that they are buying worthless fraudulent mortgage. No chain of title, no note equals NO FORECLOSURE! anyone who finds themselves in this mess needs to stand up IN COURT and demand strict proof that the bank foreclosing has the proper unaltered ORIGINAL NOTE otherwise they win and YOU LOSE!

Rick Reed
October 25, 2012 at 5:22 pm

What will this mean for Bank of America if they are found liable? And what will mean for current Bank of America customers when 1 out of every 2 persons has some form of a BA account?

Mary
October 25, 2012 at 1:50 pm

Regarding the lack of cooperation from B of A. You may want to consider filing a complaint against them. The compensation on a complaint can be up to $125,000. Sometimes the lack of cooperation from a lender on an existing loan for short sale is due to the loss share agreement they may be in with the FDIC. They make more money if the loan goes to foreclosure. The OCC has been looking at how the servicers and lenders treated the borrowers. Good luck.

Mary
October 24, 2012 at 7:52 pm

Any thoughts on whether or not this "lawsuit" against Bank of America could perhaps benefit my situation? I bought my first home in 2006 and ended up with an 80/20 loan (biggest mistake ever). The first and second mortgage were both with US Bank and the broker said it was basically just like having one mortgage since they are both with the same bank anyway, and it would save me money by eliminating mortgage insurance (yeah right). The primary mortgage was a fixed rate 30 year loan and the 2nd mortgage was a 5 year arm with a balloon payment due at the end of the loan term. Almost immediately after purchasing the home, the 2nd mortgage was sold to Countrywide and then sold again to Bank of America. I tried to sell my home through a short sale but it was impossible to get both US Bank and Bank of America to agree on the terms of the sale and my home foreclosed in 2009. The foreclosure wiped out the primary mortgage, but the 2nd mortgage with Bank of America is now an unsecured debt, and I owe them $35,000 on a home I no longer own. I know I am not the only one that was suckered into taking on 2 mortgages for one house. I did receive a letter indicating that someone would be contacting me for an Independent Foreclosure Review. It would be really nice if I could bounce back from this someday. It's been almost 4 years since I lost my home and Bank of America is still reporting my second mortgage as a fresh delinquency every single month so my credit score can't improve. I just don't want to get my hopes up.