FraudNews
10-28-2012, 12:52 PM
The Obama Administration is going after one of the biggest banks on Wall Street – Bank of America – charging it with wholesale mortgage fraud.
According to a complaint, that the Manhattan U.S. Attorney Preet Bharara filed, Bank of America allegedly knowingly and methodically sold toxic home loans to both Freddie Mac and Fannie Mae, the government’s sponsored mortgage finance giants.
The Justice Department claimed that based on the company’s fraud, the two mortgage finance giants lost a combine total of more than $1 billion, which led to their near collapse and government bailout in 2008. This cost taxpayers about $183 billion.
The suit claims that after the 2007 implosion of the subprime mortgage market, Countrywide, which Bank of America purchased in July 2008, launched a program to produce the best possible volume of new mortgages by getting rid of the quality controls. It sold the defective loans to both Freddie Mac and Fannie Mae, saying the investments were good.
When BofA purchased Countrywide, the suit alleges, the company continued the program through 2009 after it had received nearly $45 billion in taxpayer funds under TARP – Troubled Asset Relief Program.
Bharara recently released a statement saying the program named Hustle (High-Speed Swim Lane) made very bad loans that stuck the U.S. taxpayer with the bill. He said both Countrywide and BofA eliminated quality controls, disregarded underwriters and hired unqualified persons to conceal defects and cut corners. And, then, sold the toxic home mortgages to the government-backed programs like they were good loans.
The federal complaint alleges that executives with Countrywide knew about the fraud. In a January 2008 quality review, 57 percent of the Hustle loans were in default but the review was buried by upper management. The complaint said BofA refused to buy the mortgages back even when the loans showed fraudulent defects and misrepresentations.
BofA denies the charges, saying the company cannot be expected to compensate for all entities that claim losses that were really caused by the recession. The bank, even if ordered to pay the more than $1 billion, Bharara is demanding, is unlikely to suffer from financial harm. It has more than $2 trillion in assets and more than $115 billion in revenues.
According to a complaint, that the Manhattan U.S. Attorney Preet Bharara filed, Bank of America allegedly knowingly and methodically sold toxic home loans to both Freddie Mac and Fannie Mae, the government’s sponsored mortgage finance giants.
The Justice Department claimed that based on the company’s fraud, the two mortgage finance giants lost a combine total of more than $1 billion, which led to their near collapse and government bailout in 2008. This cost taxpayers about $183 billion.
The suit claims that after the 2007 implosion of the subprime mortgage market, Countrywide, which Bank of America purchased in July 2008, launched a program to produce the best possible volume of new mortgages by getting rid of the quality controls. It sold the defective loans to both Freddie Mac and Fannie Mae, saying the investments were good.
When BofA purchased Countrywide, the suit alleges, the company continued the program through 2009 after it had received nearly $45 billion in taxpayer funds under TARP – Troubled Asset Relief Program.
Bharara recently released a statement saying the program named Hustle (High-Speed Swim Lane) made very bad loans that stuck the U.S. taxpayer with the bill. He said both Countrywide and BofA eliminated quality controls, disregarded underwriters and hired unqualified persons to conceal defects and cut corners. And, then, sold the toxic home mortgages to the government-backed programs like they were good loans.
The federal complaint alleges that executives with Countrywide knew about the fraud. In a January 2008 quality review, 57 percent of the Hustle loans were in default but the review was buried by upper management. The complaint said BofA refused to buy the mortgages back even when the loans showed fraudulent defects and misrepresentations.
BofA denies the charges, saying the company cannot be expected to compensate for all entities that claim losses that were really caused by the recession. The bank, even if ordered to pay the more than $1 billion, Bharara is demanding, is unlikely to suffer from financial harm. It has more than $2 trillion in assets and more than $115 billion in revenues.