FHA Claims Against Bank of America / Countrywide Settled

Loretta E. Lynch, U.S. Attorney for the Eastern District of New York announced the settlement of claims her office had brought against Bank of America, Countrywide Financial Corporations and some of its affiliates for underwriting and origination mortgage fraud.  The settlement ends an inquiry into whether Countrywide, acquired by Bank of Boston in 2008, had knowingly made loans insured by FHA to unqualified home buyers. 

The settlement, in the amount of $1 billion requires an immediate payment of $500 million to correct some of the harm done to FHA by Countrywide's conduct [... it is unclear whether the $1 billion to be paid by Bank of America is part of the $25 billion master settlement or an addition to that amount].  The remaining $500 million will be deferred to fund a loan modification program for borrowers across the nation with Countrywide mortgages that are under water...

According to the announcement, this is the largest ever False Claims Act settlement relating to mortgage fraud.  In addition to lending to unqualified borrowers the allegations against Countrywide included claims that they had originated loans based upon inflated appraisals.