Paddy Deighan is a real estate investor, attorney and advocate. This blog is dedicated to providing useful information, tips and guidelines for all of your real estate needs.
Monday, December 10, 2012
Feds Suing Bank of America over CountryWide Activity
The federal government appears to be looking at an alleged massive fraud case against Bank of America. Bank of America may have settled with the state attorneys general over mortgage and foreclosure fraud, but the Federal government is now looking at the bank activity. The U.S. Department of Justice announced recently that it is suing BofA for “over $1 billion [in] alleged mortgage fraud related to the sale of loans to Fannie Mae and Freddie Mac”. In the first civil fraud suit of its kind, the Justice Department is tackling BofA’s beleaguered Countrywide acquisition in 2008. The government alleges that from 2007 to 2009, Countrywide used a loan process called a “hustle” to push loans through quality checkpoints and eliminate those checkpoints whenever possible. Employees were compensated based on volume of loans originated rather than based on the quality of those loans. At first glance, this type of employee bonus program is fraught with problems and the government is likely to look into this bonus program as it attempts to prove its case against Bank of America.
Industry analysts call the move by the Justice Department a “novel effort by the government to defray costs tied to the 2008 bailout of Fannie and Freddie,” and suggest that if the suit is successful, it “opens a new front against [the] banking industry”. The suit is based on violations of the Federal False Claims Act, which calls for triple damages to be paid by violators if the government can prove that their actions led to taxpayers losing money or being ripped off. Fannie Mae actually stopped buying and guaranteeing new loans from BofA this past February in response to the lender’s refusal to repurchase billions in defaulted mortgages from the GSE.
This is certainly a pretty big deal and I am surprised that there has been no mention of this in the media.
Paddy Deighan J.D. Ph.D