Editor’s Note: OK I’m glad they sued and I am glad they are alleging “brazen fraud.” But considering the trillions that were lost from this fraud why are the suits for only $1 billion and the settlements for only $25 billion? Why are we not clawing back the ill-gotten money from the brazen fraud they are alleging, giving relief to the victims (investors and homeowners) and restoring the country’s financial system to sound footing?
BOA stands accused, again and again, for “carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.”
I ask you. Are there two sets of rules. Who amongst us would not have criminal charges brought against us for this behavior?
But the main concern I have is that both prosecutors and the media have not considered the fact that this was not “Slipshod” as the article reports or negligence or even gross negligence. It was intentional.
The mega banks made mega money in two main ways: (1) they pretended to own the loans and declare defaults or write downs on pools that were insured or covered by credit default swaps, keeping the money for themselves instead of the investors. (2) The crappy loans made the most money for the banks — because they were able to put a higher rate on the mortgage and thus lend out less money to achieve the same dollar return projected to the investors. The rest of the money they kept.
That is called a PONZI scheme because there is no way to payback the money without more investors buying into the bogus mortgage bonds. Dreier is serving a long sentence, Madoff is serving a long sentence but Dimon and other Mega bank executives are serving terms on bank boards of directors and on the Board at the New York Federal Reserve. Does that sound right to anyone’s ears?
U.S. Accuses Bank of America of a ‘Brazen’ Mortgage Fraud
By BEN PROTESS, www.nytimes.com
9:34 p.m. | Updated
Five years after the housing market crumbled, government officials are still trying to assign blame for the problems that fueled the mortgage boom and bust.
On Wednesday, federal prosecutors in New York took aim at Bank of America. They accused it of carrying out a scheme, started by its Countrywide Financial unit, that defrauded government-backed mortgage agencies by churning out loans at a rapid pace without proper controls. In a civil suit, prosecutors seek to collect at least $1 billion in penalties from the bank as compensation for the behavior that they say forced taxpayers to guarantee billions in bad loans.
Financial firms have been battling chaotic – and at times redundant – litigation related to the mortgage mess. The cases have come from a patchwork of federal agencies, state officials and shareholder suits, some of which have been resolved in multibillion-dollar settlements.
“They never know who’s going to be coming after them next,” said Dan Hurson, a former federal prosecutor who now defends securities cases. “There’s no central traffic cop.”
Still, the public has been frustrated with the limited number of criminal actions that have been filed since the financial crisis. Few cases have taken aim at top executives. Even in the latest case against Bank of America, no company officials were sued as part of the complaint. Angelo R. Mozilo, the former chief executive of Countrywide Financial, never faced criminal charges but did agree in 2010 to pay $67.5 million to settle a civil fraud case brought by the Securities and Exchange Commission.
Mr. Hurson said that the government had yet to overcome the notion that federal authorities were reluctant to pursue the top rungs of Wall Street. The criminal actions to come from the crisis, he noted, have focused on “small-time operators.”
The government, however, has contended that it has aggressively pursued mortgage fraud. As the legal deadline approaches for filing crisis-related cases, President Obama formed a mortgage task force to investigate wrongdoing. The unit recently announced its first case, taking action against JPMorgan Chase over mortgage deals created by Bear Stearns, the firm that JPMorgan bought during the crisis.
The legal problems for Bank of America, however, have taken a deeper financial toll, costing the bank billions in write-downs and settlements. Much of its problems stem from its takeover of Countrywide Financial, once the nation’s largest mortgage lender. The bank also struck a $2.4 billion deal in September to settle a class-action lawsuit over shareholder claims that it misled investors about the 2009 purchase of Merrill Lynch.
In the lawsuit on Wednesday, the Justice Department attacked a home loan program known as the “hustle,” which the bank inherited from Countrywide in 2008 and kept alive through 2009.
Prosecutors say the venture was a symbol of Wall Street’s slipshod standards during the mortgage bubble. According to the lawsuit, Countrywide rubber-stamped mortgage loans to risky borrowers and passed them on to Fannie Mae and Freddie Mac, the two government-controlled mortgage financial giants that guaranteed the loans. The two entities were ultimately stuck with heavy losses and a glut of foreclosed properties.
“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “This lawsuit should send another clear message that reckless lending practices will not be tolerated.”
Mr. Bharara filed the civil suit along with the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. The government watchdog for the bank bailout program, the special inspector general for the Troubled Asset Relief Program, or TARP, also joined the complaint.
In a statement, a Bank of America spokesman said the bank “has stepped up and acted responsibly to resolve legacy mortgage matters; the claim that we have failed to repurchase loans from Fannie Mae is simply false.” The spokesman, Lawrence Grayson, added, “At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
The case builds on a broader federal crackdown of Wall Street that continues years after the onset of the crisis. In a last-ditch effort to hold financial firms accountable, Mr. Bharara this month sued Wells Fargo over questionable mortgage deals.
The assertions in the Bank of America suit, however, do not shed much new light on the mortgage mess. The Federal Housing Finance Agency last year sued 17 big banks over losses sustained by Fannie Mae and Freddie Mac over different mortgage-related products. The twin mortgage finance companies, also bailed out by taxpayers in 2008 and still controlled by the government, continue to push firms like Bank of America to repurchase billions of dollars in bad loans.
The flurry of litigation, which comes on the cusp of the presidential election, has caused some on Wall Street to question whether the effort is rooted in political motivations.
Other white-collar lawyers say the complaints rehash old claims put forth by private investors. JPMorgan says that the government urged it to buy Bear Stearns, a defense that does not apply to Bank of America, which acquired Countrywide as part of an aggressive expansion effort.
Still, a lawyer close to the Bank of America case, who spoke on the condition of anonymity because the case was continuing, argued that the bank had already repaid Fannie Mae for some of the soured loans in question. Other loans, this person argued, were never before disputed by Fannie Mae.
The lawsuit threatens to impose steep fines on the bank. The Justice Department filed the case under the False Claims Act, which could provide for triple the damages suffered by Fannie and Freddie, a penalty that could reach more than $3 billion.
The act also provides an avenue for a Countrywide whistle-blower, Edward J. O’Donnell, to cash in. Under the act, the government can piggyback on accusations he filed in a lawsuit that was kept under seal until now.
Mr. O’Donnell, who lives in Pennsylvania, was an executive vice president for Countrywide before leaving the company in 2009. The government’s case in part hinges on the credibility of his claims.
In the 46-page lawsuit, prosecutors contend that Countrywide abandoned its lending standards in 2007 with the creation of the “hustle” program. Short for “HSSL,” or “High-Speed Swim Lane,” the program adopted the motto “move forward, never backward,” prosecutors said, citing Countrywide documents.
With the goal of generating a high number of loans, Countrywide tore down internal controls known as tollgates that were in place to slow the mortgage process and root out risky borrowers. The firm at one point removed trained underwriters from the loan process, opting instead to rely on “unqualified and inexperienced” loan processors.
At times, prosecutors claim, loan processors crossed a legal line. Some “repeatedly did manipulate” loan forms, jotting down higher incomes for borrowers so they would qualify for Fannie Mae’s standards.
By early 2008, the lax standards started to show. More than a third of the unit’s loans were defective, a significant jump over the industry standard of about 5 percent.
Despite the poor performance, prosecutors said, the bank sold the loans to Fannie Mae and Freddie Mac and “concealed the defect rates and continued the hustle.”
29 thoughts on “BOA Sued for ONLY $1 Billion by NY Federal Prosecutor”
hi neil, thank you for this article.
judge rakoff asked the prosecutors to amend the complaint by the years end if they are going to charge individuals.
question to anyone:
could they amend the years of the fraud? could they amend to include loans created prior to 2007?
That sure sounds right on carie…..I had a run in with re-con-trust. They tried some fake tare on me. It was a postcard that said my house was about to be swapped…I called them & told the guy I never had a mortgage with them. The guy told me shhhh…& hung up on me. What a jerk…These FED INVESTORS really don’t like us. What a bunch of ingrates…!
THEY WON’T TELL YOU WHO THE MYSTERIOUS “INVESTOR” IS BECAUSE THEN THEY WOULD HAVE TO REVEAL THAT THEY ONLY HAVE COLLECTION RIGHTS—NOT OWNERSHIP—
(not merely “crappy loans”):
“…First, “certificate purchasers” are the banks themselves (security underwriters), and they only purchase a “pro-rata” share to a “pool” of cash flows —- that is all — they are NOT the mortgagee/creditor—the trust is assigned the loans from which the pass-through cash flows are derived—it is the DEPOSITOR (subsidiary), that owns the collections rights (they are NOT mortgage loans), and the MBS Trust itself.
The “certificate purchasers” (the bank security underwriters (another subsidiary) themselves) then repackage the certificates to “pro-rata” cash flows into CDOs that are marketed to security investors — who are also never the mortgagee/creditor.
According to all PSAs — there must be a documented valid sale of the “loans”, with supporting Mortgage Schedule to the Depositor in order for any Trust to be valid.
There was NEVER any valid sale of loans — and the loans were NEVER actually “loans” — they were COLLECTION RIGHTS.
Second, since the “loan” refinances (subprime/alt-a), and jumbo new purchases were (already) non-compliant and non-performing manufactured defaults, (by the GSE’s) NO FUNDING at all was necessary (except for the cash-out for the loans).
The warehouse lines of credit NEVER actually transferred any actual cash for funding.
These lines of credit were simply “credit lines” that the “Depositor” would provide to their correspondent lenders.
Once the “loan” refinance origination was completed the Depositor would then reverse the “credit” owed by the correspondent (originator). This never involved any actual deposit of cash proceeds —- the “funding” payoff check is never “deposited” into any bank account.
The check is routed to a security derivative clearing house — who then simply CANCELS the credit-line transaction.
Third, it is not productive to state that since someone else was actually making payments on the “loan”, “albeit” not the borrower, that the loan is not in default.
Courts do not care about this — they only care if the borrower is in default.
However, if the actual party does not come forward claiming that the debt is owed to them, and the actual party cannot prove how they came to own the collection rights — borrower does not owe the debt to anyone.
That party is never going to able to demonstrate that collection rights belong to them because they would have to divulge the above fraudulent process and that the “mortgage loan” from onset was not a mortgage but, instead, COLLECTION RIGHTS.
This admission would also mean that the “debt” is unsecured and can be discharged in BK.”
LIBOR RIGGED RATE LAWSUITS ARE ALIVE AND COMING.
http://www.bloomberg.com/news/2012-10-26/rbc-socgen-said-to-be-among-banks-subpoenaed-in-probe.html I would think a rigged rate on a contract would void that contract at inception.
Such as Bank of America writing time and time again the holder and owner of your note is The Bank of New York Mellon and what does the Bank of New York Mellon write and say:
From: “MBS.Property.Inquiries@BNYMellon.com”
To: Leah Dean
Sent: Wednesday, October 17, 2012 1:36 PM
Subject: Re: 2616Mill Creek Dr Pasadena TX 77503 Acct #155397447
Thank you for your recent correspondence.
As per our database, you will need to contact the servicer for the address(es) listed in your email. The servicer info is as follows:
Servicer: Bank of America N.A.
Phone #: 800.669.6650/ 888.219.7773/ 866.781.0029 (option 3)/ 877.498.7226/ 800.669.2443
The servicer is the direct and only contact who would have the information you are seeking. BNY Mellon is not an investor but a Trustee and therefore does not physically own the loan or the property. BNY Mellon does not have any say in how the property is disposed, loan modifications, etc. This is the responsibility of the Servicer.
Thank you for contacting BNY Mellon.
BNY Mellon Property Inquiries
Global Corporate Trust – Mortgage Backed Securities · Fax 212.815.8094
And Bank of America also said Bank of America does not have to divulge any information regarding Second Subordinate Liens which they claim to be the Investor. If you don’t have anything to hide the why not show the information requested regarding 2nd liens. Bank of America even claims they have discontinued robo signing. Just as recent as October 2012 another Melanie D Cowan shows up on Google as VP of Argent Bank. On so the drama of Bank of America turns my stomach continues. Who is behind telling these employees of Recontrust to robo sign these documents? I wonder who the big dawg is that is telling them to continue with what they are doing?
If you look at the same reasons RECONTRUST WAS THROWN OUT OF WA YOU WILL FIND RECONTRUST IS UNLAWFUL IN EVERY STATE.
http://livinglies.wordpress.com/2012/08/21/boas-recontrust-thrown-out-of-washington-state-as-substitute-trustee/
USA v. BOA… COMPLAINT: http://s3.documentcloud.org/documents/483933/bank-of-america-complaint.pdf
http://www.propublica.org/article/freddy-mac-mortgage-eisinger-arnold
He he he he he!
There is a god!
http://www.marketwatch.com/story/major-banks-governmental-officials-and-their-comrade-capitalists-targets-of-spire-law-group-llps-racketeering-and-money-laundering-lawsuit-seeking-return-of-43-trillion-to-the-united-states-treasury-2012-10-25
And then there are angles of mercy!
http://mortgage-modification-attorney.com/freddie-and-fannies-mortgage-shell-game/
@shelley
all of the above.
fannie freddie did the false default—what do they need notes for? they knew they weren’t real…
I pray this case brings out the fraud by Freddie and Fannie! Look up “Freddie and Fannie Shell game” by Shawn Newman. Freddie and Fanniie had a policy in place to never recieve the notes. They did not want the notess! WHY? To conceal fraud? evade Ttaxes? evade securities fraud? WHY?
http://stopforeclosurefraud.com/2012/10/25/big-news-bofa-employees-could-face-charges-in-us-fraud-case-prosecutor/comment-page-1/#comment-60830
Suppose any of the victims, who are now living in someone’s attic or in their car, will be made whole again? No, that settlement money will just benefit the already rich.
@Deborah Wynn
We receved a 1099 A as well from One West and our CPA was very confused as to why a 1099 C cancellation of debt was not included as well. Anything shared would be greatly appreciated. I believe we have till the end of 2012 for the debt to be forgiven according to the The Mortgage Forgiveness Debt Relief Act and Debt Cancellation.
“…Simply put, just because someone produces a note, does not mean it is valid.
The subprime fiasco was about fraud.
This is not about predatory loans, although many of the modifications/refinances (falsely called notes) were predatory.
This is about LOAN fraud itself.
This is about converting a valid GSE loan into a fraudulent “default” loan.
This is about fraudulent subprime refinances/purchases—falsely presented as “mortgage” refinances…
A note is not a note if is was procured by fraud, and if the prior mortgage is not discharged.
And, THIS is what occurred.”
WE THE PEOPLE can send a clear message that we are refusing to cooperate, comply & conform with this manufactured tyranny & oppression that has been fraudulently induced upon the American people by the unconstitutional & illegal strawman for the FED INVESTORS witch is the INSOLVENT FEDERAL RESERVE BANK…..
RD – take two. In my lay opinion, you can expect some big arguments to your allegations on page 7, at least the way they’re framed. To help counter them, you might want to look at In re Nosek in MA. In Nozek, as I recall, FNMA was hit with big sanctions, even tho the appeal court reduced them dramatically. Still, might help to show a pattern of bad behavior. Feel free to email me at johngault764@yahoo.com – NOT for legal advice since I’m not an attorney, but just for discussion. Even if you don’t email me for discussion, I’d be very interested in the response and I will likely miss following the case if not reminded. If you do email me, I will give you the case law I think they may rely on to undermine YOUR arguments. Not saying it’s reliable or not – can’t. Can only suggest you get legal advice thereto.
It is well known now that there are serious conflict of interest issues regarding the U.S. GOVT. the FED & THE FED INVESTORS entire manufactured mess. They would NEVER do anything to inflict any harm on of the FED INVESTORS…because in turn, they would be doing harm to themselves. These crooks knew what they were doing. This is just more of their SOCIAL JUSTICE crap. They want to give the illusion that justice is being served. It’s not. This is coming out of our pockets if this case is won. It’s more Kabuki from the witchdoctors at the FED for the benefit of their investors. Nothing with the Govt happens by accident. Everything is well planned. They are all working together against the American people like a well synchronized clock.
Mr. Davet, I’m only partially thru reading your appeal memo. So far I think you’ve done a really good job. Your arguments that res j cannot attach to a void judgment could spell good news for many others.
I’m personally happy to see your attack on jurisdiction, because it is as you know a dispositive threshold issue. Thanks for linking your pleading. Really – thanks.
Huge theatre for the benefit of the taxpayers who are footing the bill for this scam called “The GSE Business Model”. If you think that the GSEs were not fully complicit, I have a bridge for you in Brooklyn.
http://www.scribd.com/doc/110901076/Memorandum-in-Support-of-Jurisdiction
Richard Davet v Federal National Mortgage Association
@carie
I’m working on somethings the 1099a I have same situation. When I have more info I’ll share.
If the dominos fall it will lead back to the house and senate and to some that sat on freddie and fannie.
@joann
The statement ” this nation and out courts Are held hostage” the question is how come. Because doing the right thing was compromised over and over by people who ls lacked integrity and sold out to the color green…. I had a friend once and I remember the exact moment she said ” the only thing you can trust is the color green” I saw her very differently from that moment on , needless to say we are no longer friends. Long long story there.
@joann
They bow to the Bank Gods…like Barofsky says—obsequiousness personified…these TBTF banks are their dieties…
Then there is this:
http://www.huffingtonpost.com/2012/10/22/barney-frank-jpmorgan-chase-bear-stern_n_2003732.html?utm_hp_ref=business
JD was the saviour. He did everyone a favor. We owe him. Chase is the good bank………
Both the Dems and the Republicans think so…….
Where is the candidate who is not beholding to JD and CO? Bof A is a deserving scapegoat getting off easy. What about the rest? This nation and our courts are hostage.
Question to servicer/debt collector:
“Why does it have the name of the DEBT COLLECTOR—OneWest Bank—under where it says: LENDER on my 1099 A tax form that you sent to me after you stole my house?”
Answer:
(crickets)…
Oh, say it isn’t so…there is no debt to discharge. Bet ya? I never borrowed any money from a Lender. The originator did and didn’t properly connect the contractual obligation to me. Sucks to be them. No loan, no default, no payment due, no contract, etc…done, your Honor!
NO, NEIL—IT DOESN’T “SOUND RIGHT TO ANYONE’S EARS”…
HERE IS THE PONZI (not merely “crappy loans”):
“…First, “certificate purchasers” are the banks themselves (security underwriters), and they only purchase a “pro-rata” share to a “pool” of cash flows —- that is all — they are NOT the mortgagee/creditor—the trust is assigned the loans from which the pass-through cash flows are derived—it is the DEPOSITOR (subsidiary), that owns the collections rights (they are not mortgage loans), and the Trust itself.
The “certificate purchasers” (the bank security underwriters (another subsidiary) themselves) then repackage the certificates to “pro-rata” cash flows into CDOs that are marketed to security investors — who are also never the mortgagee/creditor.
According to all PSAs — there must be a documented valid sale of the “loans”, with supporting Mortgage Schedule to the Depositor in order for any Trust to be valid.
There was never any valid sale of loans — and the loans were never actually loans — they were collection rights.
Second, since the “loan” refinances (subprime/alt-a), and jumbo new purchases were (already) non-compliant and non-performing manufactured defaults, (by the GSE’s) no funding at all was necessary (except for the cash-out for the loans).
The warehouse lines of credit never actually transferred any actual cash for funding.
These lines of credit were simply “credit lines” that the “Depositor” would provide to their correspondent lenders.
Once the “loan” refinance origination was completed the Depositor would then reverse the “credit” owed by the correspondent (originator). This never involved any actual deposit of cash proceeds —- the “funding” payoff check is never “deposited” into any bank account.
The check is routed to a security derivative clearing house — who then simply cancels the credit-line transaction.
Third, it is not productive to state that since someone else was actually making payments on the “loan”, “albeit” not the borrower, that the loan is not in default.
Courts do not care about this — they only care if the borrower is in default.
However, if the actual party does not come forward claiming that the debt is owed to them, and the actual party cannot prove how they came to own the collection rights — borrower does not owe the debt to anyone.
That party is never going to able to demonstrate that collection rights belong to them because they would have to divulge the above fraudulent process and that the “mortgage loan” from onset was not a mortgage but, instead, COLLECTION RIGHTS.
This admission would also mean that the “debt” is unsecured and can be discharged in BK.”