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Bank of America Ordered to Pay $1.3 Billion for Mortgage Fraud

stromlaw.com | August 5, 2014

By Pete Strom

On Wednesday, July 30th, a federal jury ruled that Bank of America would pay $1.27 billion in civil penalties for mortgage fraud and bad home loans sold to Fannie Mae and Freddie Mac, which in part triggered the Great Recession in 2008.

In October last year, the jury ruled that Bank of America was liable for its role in bad mortgage exchanges leading up to the recession, along with subsidiary Countrywide, and one former CEO in particular.

The US Justice Department argued that Countrywide, which was purchased by Bank of America in 2008, committed mortgage fraud by selling shoddy mortgages to Fannie Mae and Freddie Mac, triggering the housing crisis and recession. Bank of America has been ordered to pay $863.6 million for the fraud.

The government has also demanded that Rebecca Mairone, a former executive of Countrywide, face penalties for her role. Reportedly, she ignored signs of problems with the mortgages and continued to sell them, knowing they were problematic. She played a role in extending loans to low-income families with the knowledge that they would be unable to pay a fluctuating monthly payment. Countrywide was cited for placing emphasis on volume of loans, rather than quality.

Bank of America bought Countrywide in 2008, after the mortgage fraud policies had been put into place, and argued that it should not face penalties regarding Countrywide’s poor decisions.

“We believe that this figure simply bears no relation to a limited Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company,” Bank of America spokesman Lawrence Grayson said Wednesday.

Ms. Mairone herself was fined $1 million for her role in the mortgage fraud and recession, a rare example of a Wall Street executive being held responsible for their poor financial decisions leading to the economic crisis. The judge even issued guidelines stating that Ms. Mairone would have to pay the fine out of her own income.

Bank of America, meanwhile, has stated that it will pursue an appeal process against the mortgage fraud judgment.
Mortgage Fraud in South Carolina

Mortgage fraud is the misrepresentation of information or the omission of information on a mortgage application in order to obtain a loan or obtain a higher loan offered by the lender had they known the truth.

The two main schemes used to commit mortgage fraud include “flipping properties” and inflating appraisals. While “flipping” properties is legal, it becomes illegal when a nominee or straw buyer buys the property. A nominee/straw buyer is one who buys the property for another person because the other person already has loans out on other property. If the nominee/straw buyer defaults on the mortgage, which was the case for many with the downturn of the economy, the investor may face charges of fraud for using deception to obtain the loan.


Back to August 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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