NYC Feds Tag BofA For $1B For Allegedly Generating Thousands Of Fraudulent & Otherwise Defective Home Loans Peddled To Fannie, Freddie

In New York City, The Associated Press reports:

• The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.
  
  The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America’s purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
  
  The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages. “This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara said in a statement. He described Countrywide’s practices as “spectacularly brazen in scope.”
  
  He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.

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• 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.”

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• 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.

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• In the past year and a half, Bharara’s office has settled lawsuits against CitiMortgage, Flagstar Bank and Deutsche Bank over mortgages. Its lawsuits against Wells Fargo and Allied Home Mortgage are pending.
  

For the story, see US suit cites ‘brazen’ mortgage fraud at Countrywide, even after Bank of America purchase.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Sues Bank Of America For Over $1 Billion For Multi-Year Mortgage Fraud Against Government Sponsored Entities Fannie Mae And Freddie Mac.

For the lawsuit, see U.S. v. Countrywide Home Loans, Inc., et al.