The Federal Housing Finance Authority (FHFA) is asking for more than $6 billion in penalty fees from Bank of America for the bank’s role in misleading mortgage agencies such as Fannie Mae and Freddy Mac during the housing boom. The FHFA is the regulatory agency that oversees the two government-backed mortgage agencies, both of which nearly failed in 2008 as a result of subprime mortgage lending.
The FHFA has sued 17 financial institutions that it says broke securities laws. It’s alleged that the banks misled government-sponsored mortgage agencies about the quality of mortgages they sold them. Fannie Mae and Freddie Mac back about half the existing U.S. home loans.
Bank of America acquired Countrywide Financial Corp. in 2008, which is the mortgage lender tied to the bad subprime mortgages. Bank of America has already spent more than $40 billion in litigation related to mortgage litigation and has set aside an additional $300 million for mortgage litigation in the latest quarter. Additionally, while Bank of America purchased Countrywide for $4 billion in 2008, analysts say they believe Bank of America has already paid close to $50 billion in fines and settlements.
On Oct. 23, a jury found Bank of America liable for civil fraud and for defrauding Fannie Mae and Freddie Mac by selling them defective home loans. The jury also found a former Countrywide Financial executive officer, Rebecca Mairone, liable on civil fraud charges. The judge will determine the amount of penalties, but the U.S. attorney’s office in Manhattan, which brought the case, has previously said it was seeking $848 million in penalties. Regardless, in the midst of settlement negotiations and ongoing cases with other banks, the Bank of America matter gives the government a resounding victory.
While Bank of America continues to fight the claims in court, it appears that this bank has the most at stake, with securities valued at more than $52 billion. In comparison, JPMorgan has securities with a national value of $33 billion. UBS, Citigroup and General Electric have already settled their cases with the FHFA. Litigation is still pending for Royal Bank of Scotland, Credit Suisse, Golman Sachs and Barclays, among others. If you need more information on this subject, contact Chad Stewart, a lawyer in our firm’s Consumer Fraud Section, at 800-898-2034 or by email at Chad.Stewart@beasleyallen.com.
Sources: MSN.com, Financial Times, dealbook.nytimes.com
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.