The government has been cracking down lately against mortgage fraud in the housing finance industry, slapping large companies with enormous lawsuits. A recently-filed Bank of America mortgage fraud suit seeks $1 billion in problems for toxic loans sold to Fannie Mae and Freddie Mac.
B of A mortgage fraud suit a consequence of acquiring Countrywide
Countrywide is a mortgage lender that Bank of America bought when it went under during the recession. It is one of the mortgage businesses that were known for making a ton of financial blunders. B of A has been dealing with a lot of lawsuits because of the things the company did.
Another such lawsuit has just been filed by the United States Attorney of Manhattan, according to the New York Times, claiming mortgage fraud in a number of loans that Countrywide sold to federally owned but privately-run mortgage insurance houses Fannie Mae and Freddie Mac. The B of A mortgage fraud lawsuit seeks $1 billion in damages.
Fast track to federal backing
A "High Speed Swim Lane" was used at Countrywide before it was owned by B of A that put mortgage loans on a fast track to federal backing without actually vetting the mortgages properly, according to the suit.
The program is alleged to have paid employees bonuses if they were willing to overlook quality of the mortgage and skip verification of income. They were even encouraged to falsify information if it meant giving out mortgage loans. According to USA Today, the program is suspected of happening from 2007 to 2009, well after Bank of America took over the company.
There was a borrower that defaulted within a year when $81,000 in debt was not disclosed on the loan documents. Another borrower was only making $2,666 per month but had written on the loan application $15,500 per month. That person defaulted in seven months. It is the bank's job to make sure all the info is right because that is not Fannie and Freddie's job.
Incorrect
The government has the right to sue considering Freddie and Fannie are basically under government control right now. The Justice Department is upset because B of A should have repurchased any loans sold under the program, but the bank failed to do so. That is why the Justice Department wants to get $1 billion in losses.
Lots of people who bought homes with the loans have been foreclosed on, though Bank of America denies any wrongdoing. A 2008 study found that 57 percent of homeowners were in the program and defaulted, according to USA Today.
B of A mortgage fraud suit a consequence of acquiring Countrywide
Countrywide is a mortgage lender that Bank of America bought when it went under during the recession. It is one of the mortgage businesses that were known for making a ton of financial blunders. B of A has been dealing with a lot of lawsuits because of the things the company did.
Another such lawsuit has just been filed by the United States Attorney of Manhattan, according to the New York Times, claiming mortgage fraud in a number of loans that Countrywide sold to federally owned but privately-run mortgage insurance houses Fannie Mae and Freddie Mac. The B of A mortgage fraud lawsuit seeks $1 billion in damages.
Fast track to federal backing
A "High Speed Swim Lane" was used at Countrywide before it was owned by B of A that put mortgage loans on a fast track to federal backing without actually vetting the mortgages properly, according to the suit.
The program is alleged to have paid employees bonuses if they were willing to overlook quality of the mortgage and skip verification of income. They were even encouraged to falsify information if it meant giving out mortgage loans. According to USA Today, the program is suspected of happening from 2007 to 2009, well after Bank of America took over the company.
There was a borrower that defaulted within a year when $81,000 in debt was not disclosed on the loan documents. Another borrower was only making $2,666 per month but had written on the loan application $15,500 per month. That person defaulted in seven months. It is the bank's job to make sure all the info is right because that is not Fannie and Freddie's job.
Incorrect
The government has the right to sue considering Freddie and Fannie are basically under government control right now. The Justice Department is upset because B of A should have repurchased any loans sold under the program, but the bank failed to do so. That is why the Justice Department wants to get $1 billion in losses.
Lots of people who bought homes with the loans have been foreclosed on, though Bank of America denies any wrongdoing. A 2008 study found that 57 percent of homeowners were in the program and defaulted, according to USA Today.
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