Bank of America to Pay Billion in Whistleblower Protection by jolinmilioncherie


									                                                           United States Attorney's
                                                           Eastern District of New York
                                                           Robert Nardoza
                                                           Public Affairs Officer
                                                           (718) 254-6323

FOR IMMEDIATE RELEASE                                             February 9, 2012

                                 PRESS RELEASE


   Agreement Resolves the United States’ Civil Claims that Bank of America, Through its
   Countrywide Financial Subsidiaries, Defrauded the Federal Housing Administration by
        Recklessly and Fraudulently Underwriting Loans to Unqualified Borrowers

     Agreement Also Resolves Claims Involving Home Affordable Modification Program

         As part of the global resolution between the United States of America and the
five largest mortgage servicing banks in the country, which will bring much needed
relief to financially distressed homeowners nationwide, Loretta E. Lynch, United States
Attorney for the Eastern District of New York, today announced that the government
will also resolve its claims against the Bank of America, Countrywide Financial
Corporation and certain Countrywide subsidiaries and affiliates (Countrywide) for
underwriting and origination mortgage fraud.

        Since 2009, the office has been investigating the Bank of America’s lending
practices to determine whether the bank, through Countrywide, which the bank
acquired in 2008, knowingly made loans insured by the Federal Housing
Administration (FHA) to unqualified home buyers. To date, the FHA has incurred
hundreds of millions of dollars in damages as a result of this conduct. The investigation
also encompassed allegations that the bank and Countrywide defrauded the FHA
insurance fund by originating mortgage loans that were based upon inflated appraisals.
During the investigation, the office determined that the bank’s conduct provides a basis

for affirmative civil enforcement under, among other legal remedies, the False Claims
Act, 31 U.S.C. §§ 3729-33.

        As part of the global settlement, 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 across the nation 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 United States.

        “We announce today the largest ever False Claims Act settlement relating to
mortgage fraud. Through their underwriting and origination of tens of thousands of
government-insured loans to unqualified borrowers, Countrywide Financial subsidiaries
systematically abused the Federal Housing Administration and became some of the
main players in this country’s financial crisis. 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. It also puts lenders on
notice that they will face serious financial consequences for violating their obligations
under the FHA’s programs,” stated United States Attorney Lynch.

      Ms. Lynch expressed her grateful appreciation for the assistance provided by
Shaun Donovan, Secretary of the Department of Housing and Urban Development
(HUD); Helen Kanovsky, General Counsel for HUD; David Montoya, Inspector
General for HUD; and Julie Shaffer, Director of the HUD Philadelphia Home
Ownership Center.

        “It is fundamental that lending institutions that earn the authority to directly
endorse FHA-insured mortgages apply our standards,” said HUD Secretary Donovan.
“This is the largest false claims act settlement related to mortgage fraud and will not
only compensate FHA but will also ensure assistance for homeowners who have been
harmed by Countrywide.”

         “This agreement is demonstrative, and should serve as a model, of what results
can be achieved when agencies of the United States Government join forces in a united
effort to combat fraud in the FHA insured mortgage program,” said Inspector General
Montoya. “OIG staff served IG subpoenas, conducted multiple interviews, reviewed
loan files, and worked closely with the U.S. Attorney’s office in developing this case.”
He further added, “I am appreciative of the tenacity with which the Assistant United
States Attorneys approached this matter, the expertise and effort of my OIG auditors,
investigators and legal team, and the assistance of the HUD Office of General Counsel

and its Office of Program Enforcement and Philadelphia Home Ownership Center
throughout this endeavor.”

       The settlement announced today also resolves the office’s investigation,
conducted with the Special Inspector General for the Troubled Asset Relief Program
and the Inspector General for the Federal Housing Finance Agency, of allegations that
Bank of America defrauded the government by failing to determine the eligibility of
homeowners to participate in the government’s Home Affordable Modification
Program. Ms. Lynch thanked Christy L. Romero, Acting Special Inspector General for
the Troubled Asset Relief Program, and Steve A. Linick, the Inspector General for the
Federal Housing Finance Agency, for their assistance in this investigation.

        The Eastern District’s investigation was conducted by Assistant United States
Attorneys Richard K. Hayes and Kenneth M. Abell, Affirmative Civil Enforcement
Auditor Emily Rosenthal, Senior Trial Counsel, Commercial Litigation Branch, United
States Department of Justice, William C. Edgar, and Trial Attorney, Commercial
Litigation Branch, United States Department of Justice, John Warshawsky.

         The joint federal-state agreement is part of enforcement efforts by President
Barack Obama’s Financial Fraud Enforcement Task Force. President Obama
established the interagency task force to wage an aggressive, coordinated and proactive
effort to investigate and prosecute financial crimes. The task force includes
representatives from a broad range of federal agencies, regulatory authorities,
inspectors general and state and local law enforcement who, working together, bring to
bear a powerful array of criminal and civil enforcement resources. The task force is
working to improve efforts across the federal executive branch, and with state and local
partners, to investigate and prosecute significant financial crimes, ensure just and
effective punishment for those who perpetrate financial crimes, combat discrimination
in the lending and financial markets, and recover proceeds for victims of financial
crimes. For more information about the task force visit:


To top