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OUT OF MIND » THE INSANITY OF REALITY » FINANCIAL COLLAPSE » U.S. Sues BofA for $1 Billion Over Mortgage Losses

U.S. Sues BofA for $1 Billion Over Mortgage Losses

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PurpleSkyz

PurpleSkyz
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U.S. Sues BofA for $1 Billion Over Mortgage Losses

Posted by nesaraaustralia ⋅ November 11, 2012 ⋅
U.S. Sues BofA for $1 Billion Over Mortgage Losses The-wall-street-journal-106x27_153522By Shayndi Raice and Nick Timiraos | The Wall Street Journal – Wed, Oct 24, 2012 12:56 PM EDT


  • U.S. Sues BofA for $1 Billion Over Mortgage Losses 2420ce7247e13d1d1e0f6a706700b858_original


  • Associated Press -
    In this Monday, Oct. 14, 2012, shows a Bank of America branch in
    downtown Miami. Bank of America said Wednesday, Oct. 17, 2012, that it
    narrowly turned …more
The federal government filed a civil lawsuit against Bank of America Corp. (BAC),
alleging the second-biggest U.S. bank by assets saddled taxpayers with
losses by misrepresenting the quality of home loans it sold to
mortgage-finance firms Fannie Mae (FNMA) and Freddie Mac (FMCC) .

The action, filed Wednesday in federal court in Manhattan, seeks at
least $1 billion in damages. The filing represents a novel effort by the
government to defray costs tied to the 2008 bailout of Fannie and
Freddie, and potentially opens a new front against a banking industry
already dealing with hefty legal costs.

The government alleges Countrywide, which Bank of America acquired in
2008, dismembered quality control and checks on loan quality in 2007
through 2009, in a process called “the Hustle” that aimed to boost the
speed at which it originated and sold loans to the companies. The
mortgage unit falsely continued to claim the loans qualified for
insurance from Fannie Mae and Freddie Mac, the complaint alleges.

A Bank of America spokesman didn’t provide immediate comment. Bank of
America shares, up 70% this year, were up six cents in midday trading
Wednesday at $9.41.

The government is suing Bank of America under the Federal False
Claims Act, which has become a popular tool for prosecutors seeking to
hold banks accountable for alleged mortgage misdeeds and calls for
triple damages when the government can show taxpayers were ripped off.

This is the second suit Preet Bharara, the U.S. attorney for the
Southern District of New York, has brought against banks it accused of
duping the federal insurance programs this month. Two weeks ago, his
office sued Wells Fargo & Co. (WFC),
the biggest U.S. mortgage company, of recklessly issuing mortgages and
leaving the Federal Housing Administration to pick up the tab.

Fannie and Freddie, while backed by taxpayers since the 2008 bailout,
aren’t part of the government. Previous suits have been brought on
behalf of government agencies such as Medicare and the FHA.

Fannie and Freddie were publicly traded entities before their market
funding evaporated in the early stages of the financial crisis, forcing
their effective nationalization. Taxpayers have since poured $142
billion into the companies, which along with other government agencies
financed nine out of 10 home loans written last year. Fannie and Freddie
don’t make loans but guarantee regular principal and interest payments
to mortgage-bond investors.

[More from WSJ.com: J.P. Morgan Gets Stung by China Downturn]

Wednesday’s suit was also brought under a federal statute known as
the Financial Institutions Reform, Recovery and Enforcement Act, which
was enacted in 1989 following a wave of bank failures triggered by the
savings-and-loan crisis.

Last year Fannie’s and Freddie’s regulator, the Federal Housing
Finance Agency, sued 18 major banks including Bank of America, accusing
them of violating federal securities law and other laws in the sale of
residential private-label mortgage-backed securities. The seven biggest
U.S. commercial banks have recognized or set aside $76 billion in
mortgage-related legal costs since 2008, according to analysts at Credit
Suisse Group (CSGN.VX).

Fannie Mae stopped buying or guaranteeing new loans delivered by Bank
of America this past February amid an impasse over billions in
defaulted mortgages that Fannie said Bank of America was obligated to
repurchase. Negotiations over resolving the dispute are ongoing,
according to both parties.

Bank of America briefly became Fannie’s top client following its
acquisition of Countrywide. It accounted for 20% of all loans Fannie
bought or backed in 2009, but that share had fallen below 10% by the
third quarter of 2011, and below 3% in the fourth quarter, according to
Inside Mortgage Finance.

The action isn’t Bank of America’s first False Claims Act suit. In
February, Bank of America agreed to a $1 billion settlement of False
Claims Act fraud allegations tied to Federal Housing
Administration-backed loans brought by the Eastern District of New York.
The bank settled without admitting wrongdoing. Three other large banks
have agreed to pay a total of more than $490 million in similar cases,
each accepting responsibility for “certain conduct.”

The suit follows in a long line of legal headaches for Bank of
America. Last month, the bank agreed to pay $2.43 billion to settle
claims it misled investors about the acquisition of brokerage firm
Merrill Lynch & Co., the largest settlement of a shareholder claim
by a financial-services firm since the upheaval of 2008 and 2009.

The lawsuits continue to underscore how the hasty acquisitions made
during the height of the financial crisis by Kenneth Lewis, then the
bank’s chief executive, still haunt it today. Decisions to buy mortgage
lender Countrywide and Merrill have forced Bank of America, run since
2010 by Chief Executive Brian Moynihan, to shoulder some $42 billion in
litigation expenses, payouts and reserves, according to company figures.
Thanks to: http://nesaraaustralia.com



  

NanneeRose

NanneeRose
Admin
Admin

I gotta say I wouldn't be borrowing money from a company that was called Fannie Mae or Freddie Mac but that's just me..



It's the simple things, small every day deeds of ordinary folk that keep the darkness at bay. Small acts of kindness and love.......~Gandalf~

PurpleSkyz

PurpleSkyz
Admin

Fannie Mae used to represent a really good candy company. Now... not so sweet.



  

NanneeRose

NanneeRose
Admin
Admin

Oh dear. At least the name sounds right for a sweets company!



It's the simple things, small every day deeds of ordinary folk that keep the darkness at bay. Small acts of kindness and love.......~Gandalf~

terbo56

terbo56

Unlike 'Russell Stover'- When he first started his business, one of his pouring machines fell off the back of the truck, tipped over and hit the floor, and it 'Stover' all to hell- :lol:

PurpleSkyz

PurpleSkyz
Admin

Well it is still SWEET to see BofA get what is coming to them. That goes for ALL of the big name banks.
If you have a saving or checking in these banks PULL out most of your money. In Coins! :) The silver is the only thing that will be valuable after it all goes down globally.



  

terbo56

terbo56

That's my plan- It's all we'll have to buy or barter with-We all need to think about that, and hard, because IF we miss out, we're gonna be in a heap of trouble! I already have some silver- Will work on getting more, along with a few pieces of gold- U.S. Sues BofA for $1 Billion Over Mortgage Losses 1598226751

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