The mortgage finance industry had a lot to do with the financial; meltdown of the past few years. Consequently, there have been and will continue to be lawsuits planning to undo some of the damage. A recently-filed B of A mortgage fraud suit was filed by the government, seeking $1 billion in problems from fraudulently sold mortgages.
Getting Countrywide a consequence
When Countrywide was still its own business, it made a ton of monetary mistakes that caused many people to want to sue. The company went under in 2008 when the recession hit and had to be purchased by Bank of America. Now, Bank of America is dealing with all the suits that Countrywide faced.
Countrywide sold a lot of loans to Freddie Mac and Fannie Mae, which is why another lawsuit from the United States Lawyer of Manhattan is requesting $1 billion in damages from the bank. Apparently, there was a lot of mortgage fraud that occurred during that time, according to the New York Times.
Hustle and flow
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 really 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 data if it meant giving out mortgages. According to USA Today, the program is suspected of taking place from 2007 to 2009, well after B of A took over the business.
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 information is right because that is not Fannie and Freddie’s job.
Claiming it was wrong
The government has the right to sue considering Fannie and Freddie 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 unsuccessful to do so. That is why the Justice Department wants to get $1 billion in losses.
The bank contends that the allegations are “simply false.” In the meantime, many of the people who bought homes with these loans are no longer in them. According to USA Today, a 2008 study found that 57 percent of homeowners whose loans were in the “hustle” program defaulted.
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