Bank of America and Subsidiaries Found Guilty by Federal Jury of Mortgage Fraud
A federal grand jury has found Bank of America and its subsidiary Countrywide guilty of mortgage fraud, which triggered the recession that started in 2008.
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.
“Countrywide eliminated every significant checkpoint of loan quality and compensated its employees solely based on the volume of loans originated, leading to rampant instances of fraud and other serious loan defects, all while Countrywide was informing the GSEs that it had tightened its underwriting guidelines,” the Justice Department complaint against Bank of America stated.
Mairone worked at Countrywide and Bank of America between 2006 and 2012, and currently works with JP Morgan Chase & Co. She denies any wrongdoing, and no criminal charges have been filed against her.
Bank of America has until November 20th to respond to the mortgage fraud penalties.
The financial penalty has been derided by critics for being too small, especially compared to the amount of money businesses lost during the crisis, and the $1 trillion the US government spent in stimulus money. However, the DOJ says that the mortgage fraud penalties “send a clear and unambiguous message that mortgage fraud for profit will not be tolerated.” The mortgage fraud penalties are slightly higher than originally announced – the DOJ initially sought $848.2 million.
Bank of America bought Countrywide for $2.5 billion in 2008, but the bank has spent much more money on litigation expenses since the purchase.
“We believe the filing overstates the volume of loans and the appropriate measure of damages arising from one narrow Countrywide program that lasted several months and ended before Bank of America acquired the company,” Lawrence Grayson, a spokesman for the bank, said Saturday.
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.
The Strom Law Firm Defends Mortgage Fraud Charges
Mortgage fraud is a serious offense with stiff penalties. If convicted of mortgage fraud, you could face upwards to 30 years in prison and harsh penalties. If you feel you are under investigation for your involvement in a mortgage fraud scheme, it is at the utmost importance that you contact a South Carolina Criminal Defense Lawyer at the Strom Law Firm, LLC today. We understand what is at stake, which is why we will fight aggressively for your name and your reputation. Contact us today for a free consultation. 803.252.4800.