US Sues Bank of America Over Faulty Mortgages
By Antonio Perez On October 25, 2012 @ 3:32 am In Companies | No Comments
The U.S. Department of Justice has filed a civil lawsuit against Bank of America Corp. for $1 billion in damages for mortgage fraud, the top federal prosecutor in Manhattan announced Oct. 24.
The lawsuit, filed in the Federal District Court in Manhattan, New York, alleges that Countrywide Inc., and later Bank of America, originated mortgages without proper due diligence. Such mortgages were often rushed, and were sold off to federal mortgage finance companies such as Fannie Mae and Freddie Mac, before and during the subprime loan crisis.
These loans defaulted, forcing Fannie and Freddie to take billions in losses. The two mortgage finance giants
—which guarantee trillions in mortgages—were forced to take massive federal bailouts, eventually being put into federal conservatorship in 2008.
Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.
—Preet Bharara, U.S. attorney
“Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. Countrywide and Bank of America systematically removed every check in favor of its own balance—they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners and concealed the resulting defects,” said Manhattan U.S. attorney Preet Bharara, who announced the civil suit, according to a USA Today report.
Bank of America, on the other hand, has maintained in the past that many of such mortgages—sold by the bank—defaulted because of the overall economic downturn.
The lawsuit was brought on by statements made to federal regulators by Edward O’Donnell, a former executive vice president at Countrywide. The whistle-blower, who worked at the lender from 2003 to 2009, alleges he spoke out against the practice but was ignored by management.
Bank of America acquired Countrywide, one of the biggest mortgage originators in the country, in 2008. Bank of America is the second biggest bank by assets in the United States.
Shares of Bank of America Corp., which had been up modestly to as high as $9.49 earlier in the day, declined on the New York Stock Exchange after the news was released Wednesday, closing down $0.05, or 0.53 percent, at $9.31, and were flat in after-hours trading.
The Epoch Times publishes in 35 countries and in 19 languages. Subscribe to our e-newsletter.
Copyright © 2012 Epoch Times. All rights reserved.