EagleTribune.com, North Andover, MA

Latest News

October 25, 2012

Fed suit alleges 'brazen' fraud at Countrywide

(Continued)

According to the lawsuit, Fannie and Freddie don’t review loans before they purchased them. Instead, they relied on banks’ statements that the loans met certain qualifications.

Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans later sold to Fannie and Freddie. When Fannie and Freddie collapsed, investors were wiped out.

Taxpayers have spent $170 billion to keep Fannie and Freddie afloat, and it could cost $260 billion more to support the companies through 2014 after subtracting dividend payments to taxpayers, according to the government.

The lawsuit says that Fannie and Freddie suffered $1 billion in losses because they had to pay for Countrywide’s defaulted loans. The lawsuit also complains that Bank of America is refusing to buy back mortgages “even where the loans admittedly contained material defects or even fraudulent misrepresentations.”

Bank of America’s purchase of Countrywide originally earned it plaudits from lawmakers because Bank of America was viewed as stepping in to eliminate a bad actor from the mortgage market.

But the purchase, instead of padding Bank of America’s mortgage business, has drawn a drumbeat of regulatory fines, lawsuits and losses.

Bank of America reported last week that while it is issuing more mortgages — $21 billion worth last quarter, up 18 percent from a year earlier — its mortgage unit is still losing money as the bank works through crisis-era problems.

For at least two years, Bank of America and other banks have been sifting through so-called repurchase demands from Fannie, Freddie and other investors who bought its mortgages. The repurchase demands contend that the bank should buy back mortgages that have since gone bad.

Bank of America has bought back mortgages from investors but has also said it’s not going to honor demands unless they’re valid, and won’t buy back loans that went bad simply because of the bad economy.

Text Only | Photo Reprints
Latest News

AP Video
US Mission to Rescue Hostages in Syria Failed Manfred, Torre and MLB Take Ice Bucket Challenge Bank of America Reaches Record $17B Settlement Holder Reassures Ferguson Community With Visit GlobalPost CEO Remembers Foley As a Brave Man Seth Meyers Rolls Out Emmy Red Carpet Obama: World Is Appalled by Murder of Journalist Israel, Militants Trade Fire After Talks Fail Pres. George W. Bush Takes Ice Bucket Challenge Pierce Brosnan's Call to Join the Expendables Changes Coming to No-Fly List Raw: IDF Footage Said to Show Airstrikes Police: Ferguson More Peaceful Raw: Aftermath of Airstrike in Gaza Raw: Thousands March on Pakistani Parliament Raw: World's Oldest Man Lives in Japan Fire Crews Tame Yosemite Fire Raw: Police Weapon Drawn Near Protesters, Media Raw: Explosions in Gaza As Airstrikes Resume Charter Schools Alter Post-Katrina Landscape
Photos of the Week