As a part of the recent settlement between the federal government and the nation's five largest mortgage servicers, U.S. Attorney Loretta E. Lynch says claims have been resolved with Bank of America for underwriting and origination mortgage fraud.
According to Lynch, the office of Eastern District of New York had spent more than two years investigating whether Countrywide – which B of A acquired in 2008 – knowingly made loans insured by the Federal Housing Administration (FHA) to unqualified home buyers. That investigation determined that the bank's conduct provides ‘a basis for affirmative civil enforcement.’
Bank of America will pay $1 billion to resolve the wrongdoing uncovered during the office's investigation. The settlement will entail an immediate payment of $500 million to provide a recovery for the harm done to the FHA by Countrywide's conduct. Payment of the second $500 million will be deferred to fund a loan modification program for Countrywide borrowers with underwater mortgages.
Under the terms of the program, Bank of America will solicit all potentially eligible borrowers and provide a loan modification to anyone with an eligible mortgage who accepts the offer. If, after the expiration of three years, the bank has not met its obligation to apply the full $500 million to provide such relief, any remainder will be paid directly to the U.S. government.
‘Countrywide Financial subsidiaries systematically abused the Federal Housing Administration and became some of the main players in this country's financial crisis,’ Lynch said. ‘We are committed to protecting the FHA's ability to provide assistance to qualified low-income and first-time home buyers, and this settlement goes a long way toward that end.’