U.S. Gov’t Sues Bank of America for $1 Billion
As the dust continues to settle from the 2008 financial crisis that left the U.S. in the worst economic climate since the Great Depression, the latest skeleton to fall out of Big Banking’s closet comes in the form of alleged mortgage fraud conducted by a mortgage company owned now by Bank of America.
Countrywide Financial, which was bought by Bank of America in 2008 for $4.1 billion, is alleged to have issued billions in Federally insured mortgages to vastly unqualified borrowers. When the foreclosure fallout from those bad loans hit the books, the Fed was forced to fork over $1 billion of our tax money to cover Countrywide’s losses.
This is just the latest example of why Americans need to kick Too Big To Fail to the curb, and get back to investing our money in our local private institutions that have legacies of integrity and building up our communities.
Excerpt from the AP:
“According to the lawsuit, Countrywide used a process called “the Hustle,” shorthand for “High-Speed Swim Lane.” The idea was that mortgage loans, as they were being processed, would “move forward, never backward.”
The lawsuit alleged that Countrywide traded quantity for quality and eliminated underwriters, even from mortgage loans for which borrowers did not have to get their income verified.
Instead, loan processors simply entered data into an automated underwriting system, and if the system gave the go-ahead, “no underwriter would ever see the loan,” the lawsuit alleged.
With few checks and balances, there was “widespread falsification” of the data entered into the program, Bharara charged.
Loan processors were given little guidance, the suit said: Checklists for making sure that loans were compliant — for example, assessing whether the income level that a borrower listed was reasonable — were eliminated. Bonuses were based solely on how many loans an employee could process, not the quality.
The lawsuit said that Countrywide executives were aware of the dangerous path they were treading. For example, a quality review in January 2008 showed that 57 percent of Hustle loans went into default.”