STOCK MARKET WATCH -- Thursday, 25 October 2012

[Demeter]

49. U.S. sues BofA, calling loan fraud 'brazen'

http://www.latimes.com/business/realestate/la-fi-bofa-lawsuit-20121025,0,2232907.story

The $1-billion civil suit alleges that BofA's Countrywide fraudulently deceived mortgage finance giants Fannie Mae and Freddie Mac into believing the company's risky loans were safe and sound...

WHY, PRAY TELL, IS THIS A CIVIL SUIT?

The extent of Countrywide's wayward behavior is still coming to light four years after the deal. New revelations emerged Wednesday in a mammoth lawsuit filed by the federal government. The $1-billion civil suit alleges that Countrywide fraudulently deceived mortgage finance giants Fannie Mae and Freddie Mac into believing the company's risky loans were safe and sound. Countrywide code-named its mortgage program "the Hustle" to prod employees to churn out loans as the housing market was beginning to crack.

The name was apt, said Preet Bharara, the U.S. attorney in Manhattan who brought the suit, because it underscored dubious behavior that began at Countrywide and continued at Bank of America. In its haste to stick the government with loans that it knew were flawed, Countrywide dispensed with traditional internal safeguards designed to ensure loan quality, according to the suit. The suit, which seeks treble damages, says the abuses occurred from 2007 to 2009. "The fraudulent conduct alleged in today's complaint was spectacularly brazen," Bharara said. "Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill."

Bank of America said in a statement that it "has stepped up and acted responsibly to resolve legacy mortgage matters....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 statement said.

Housing advocates hailed the suit but said Countrywide-related losses far exceed the amount the government is seeking. "It's better late than never, but it sure as heck should have been earlier and should have been more," said Dennis Kelleher, chief executive of Better Markets Inc., a liberal nonprofit group focused on financial reform.