Bank of America to Pay $16.65 Billion to Settle Mortgage Fraud Charges

Written on August 25th, 2014 in politics Comments Off

Published on CorpWatch, by Pratap Chatterjee, Aug 21, 2014.

Bank of America has agreed to pay the government $9.65 billion to settle charges of misleading investors over mortgage lending in the run up to the 2008 financial crisis. The bank will also pay out an additional $7 billion to help borrowers and communities affected by the loans.

The settlement agreement was hammered out by the U.S. Department of Justice, the Securities and Exchange Commission and the attorney generals of six states – California, Kentucky, New Jersey, New York, North Carolina and Maryland. Similar large multi billion dollar settlements over mortgage related fraud have recently been reached with JP Morgan and Citigroup for$13 billion and $7 billion respectively.  

The government argued that the banks essentially loaned large sums of money to unqualified home buyers, then resold the bad mortgages to investors, before the borrowers defaulted on them.

“These financial institutions knowingly, routinely, falsely, and fraudulently marked and sold these loans as sound and reliable investments,” said Eric Holder, the U.S. attorney general, at a press conference, where the settlement was announced. “Worse still, on multiple occasions – when confronted with concerns about their reckless practices – bankers at these institutions continued to mislead investors about their own standards and to securitize loans with fundamental credit, compliance, and legal defects.”

“It’s kind of like going to your neighborhood grocery store to buy milk advertised as fresh, only to discover that store employees knew the milk you were buying had been left out on the loading dock, unrefrigerated, the entire day before, yet they never told you,” Tony West, associate attorney general, added.

Central to the settlements is the role of Countrywide Financial, which Bank of America bought in 2008 for $2.5 billion. The largest lender of so-called “subprime” mortgages in the U.S., Countrywide was well aware that the loans were likely to fail, according to evidence discovered by government investigators … //

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