If this report by Michael Hudson is true, Countrywide Financial was truly a home for fraudsters. Hudson's report is based primarily on the account of Eileen Foster, who was in charge of the company's investigation of fraud. He also has quotes from other former Countrywide employees.
I tend to believe that Foster is telling the truth. After being fired by Countrywide, she proceeded to fire back through the Department of Labor. Foster claimed that she was fired because she exposed the company's fraudulent practices. Her case was settled last week. BofA, which bought Countrywide, was ordered to reinstate her and pay her almost $1,000,000. And, I assume, that she was free to publicize her case as BofA is unwilling to discuss the matter.
Some of the claims seem fantastical. For example, "branch employees had used scissors, tape and Wite-Out to create fake bank statements, inflated property appraisals and other phony paperwork. ... workers had, as a matter of routine, literally cut and pasted the address for one home onto an appraisal for a completely different piece of property".
- She claims Countrywide’s management protected big loan producers who used fraud to put up big sales numbers. If they were caught, she says, they frequently avoided termination.
- Foster claims Countrywide’s subprime lending division concealed from her the level of “suspicious activity reports.” This in turn reduced the number of fraud reports Countrywide gave to the U.S. Treasury’s Financial Crimes Enforcement Network.
- Foster claims Countrywide failed to notify investors when it discovered fraud or other problems with loans that it had sold as the underlying assets in “mortgage-backed” securities. When she created a report designed to document these loans on a regular basis going forward, she says, she was “shut down” by company officials and told to stop doing the report.
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