Thursday, October 25, 2012
Housing Finance Fraud Suit
The US Attorney for the Southern District of New York issued a press release about “the first civil fraud suit brought by the Department of Justice concerning mortgage loans sold to Fannie Mae or Freddie Mac” which are government-sponsored enterprises (GSEs) and financial services corporations created by the United States Congress. The 46 page Complaint in U.S. ex rel. O'Donnell v. Bank of America Corp. and Countrywide Financial Corp. seeks to recover treble damages and penalties under the False Claim Act, 31 U.S.C. §3729 (“FCA”)and civil penalties under the Financial Institutions Reform, Recovery, Enforcement Act, 12 U.S.C. §1833a (“FIRREA”). The Complaint’s allegations center on a “streamlined” loan origination program at Countrywide known as the “Hustle” that removed controls on loan quality. The charges state that “there was widespread falsification” of data entered into an automated system for underwriting loans and that the lender “knowingly originated loans with escalating levels of fraud and other serious defects and sold them to the GSEs” despite these problems. This latest legal challenge for Bank of America could cost it $1billion.
Posted by Harold O'Grady at 11:08 AM