Today the newspapers are reporting that we are suing Bank of America for $1 billion, the charge being that BofA defrauded Fannie Mae and Freddie Mac. It's another problem stemming from the acquisition of Countrywide Mortgage. This one concerns Countrywide's processing of loans. The prosecutor alleges, "Countrywide and Bank of America systematically removed every check in
favor of its own balance – they cast aside underwriters, eliminated
quality controls, incentivized unqualified personnel to cut corners, and
concealed the resulting defects. These toxic products
were then sold to the government sponsored enterprises as good loans....Countrywide eliminated every significant checkpoint on loan quality and
compensated its employees solely based on the volume of loans
originated, leading to rampant instances of fraud.”
Up to forty percent of the resulting loans in some months turned out to
have material defects, which the lawsuit says was 10 times the industry
rate. Countrywide went so far as to offer employees a bonus for
rebutting the company’s own quality control department’s findings of
defective loans, the lawsuit alleges.
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