Wednesday, October 5, 2011

BofA May Face Fraud Claims for Soured Loans

Bank of America Corp. (BAC) should face fraud proceedings after its Countrywide unit submitted faulty data to back up claims for reimbursement on federally insured mortgages, according to an audit by a U.S. watchdog.
Half of 14 loans reviewed had “material underwriting deficiencies” concerning borrowers that resulted in more than $720,000 in losses, according to a Sept. 30 report from the Department of Housing and Urban Development’s inspector general. Kelly Anderson, a HUD regional inspector general, recommended the agency pursue legal remedies against Charlotte, North Carolina-based Bank of America, the biggest U.S. lender.
“Countrywide did not properly verify, analyze, or support borrowers’ employment and income, source of funds to close, liabilities and credit information,” Kelly wrote in the audit. “This noncompliance occurred because Countrywide’s underwriters did not exercise due diligence in underwriting the loans.
In one instance, Countrywide said a borrower earned $6,192 a month when pay stubs reflected income of $4,377. In other cases, Countrywide failed to properly review bad loans to ensure they met HUD’s guidelines before submitting claims, the department said.
In a 35-page response to HUD dated July 19, Bank of America Senior Vice President Linda Jacopetti acknowledged that “oversights may have occurred in some instances” and said the unit didn’t intentionally disregard FHA guidelines. There were “isolated occurrences in a handful of cases among thousands of FHA loans originated” in that time, she said.
Lemar Wooley at HUD and Michael Zerega of the inspector general office declined to comment on the report.
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