Countrywide Conviction: Will It Mean Anything to Floridians in Foreclosure?

The subprime lending arm of Bank of America was found guilty by a jury of defrauding government-backed mortgage finance firms Fannie Mae and Freddie Mac, costing taxpayers billions of dollars.
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The finding, following a four-week trial, means that Bank of America will almost certainly be compelled to pay a large civil penalty, as yet-to-be-determined by a federal judge. Our Miami foreclosure lawyers are hoping that whatever those sanctions are, they will translate to meaningful modifications or relief for homeowners either facing foreclosure or who were victimized by the mortgage fraud scheme.

The subprime mortgage program at the heart of the case was created by Countrywide before it was acquired by Bank of America in 2008. However, it continued beyond that point too, with BofA officials almost certainly aware of what was happening.

What was happening was a “Hustle,” the name given internally to the scam. According to the U.S. Justice Department, the operation was in direct response to Fannie and Freddie boosting their underwriting guidelines and loan purchase requirements, which was due to the fact that so many loans were beginning to tumble into default.

Mind you, that happened because so many lenders were running fast-and-loose with loan requirements, offering up inflated mortgages to those who had no real hope of affording them. Banks then bundled those risky mortgages together as a package deal to investors, without informing them of the near certainty that the owners would probably default.

Prosecutors allege Countrywide did away with important checkpoints regarding loan quality throughout this time period, and even gave workers pay boosts based on the amount of loans they churned out – regardless of whether those loans were any good. In doing so, the government said, the company was engaging in a form of rampant fraud. Meanwhile, the firm was promising its financiers that everything was being done according to the book.

In reality, about 45 percent of the loans being sold to Fannie and Freddie were defective.

Prosecutors had attempted to negotiate a settlement with Bank of America prior to the trial, but the banking giant chose to fight instead. A bank representative said it still vigorously denies engaging in any type of fraud, and is mulling a possible appeal.

The jury’s verdict came ahead of a similar pending trial the Justice Department filed against JPMorgan Chase. The two sides are working to hammer out a possibly multi-billion dollar settlement, though the terms of that deal remain currently under wraps.

But again, we hope whatever the outcome, the judge will consider those homeowners who were directly harmed in all this and make it explicitly clear what remedies will be expected to alleviate their burdens.

The Justice Department had previously stated that it intended to seek some $850 billion in recompense on behalf of Fannie and Freddie. The judge will ultimately decide the amount, and hearings regarding an amount will begin December 5.

The whistle blower in the case, a Countrywide executive, stands to earn up to $1.6 million for his role in outing his former colleagues.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Bank of America’s subprime lender Countrywide found guilty of mortgage fraud, Oct. 23, 2013, Staff Report, Agence France-Presse
More Blog Entries:
Report: Florida Foreclosures Top in the Nation, Oct. 20, 2013, Miami Foreclosure Lawyer Blog