U.S. to sue big banks over mortgage securities: report

[wingrider]

snip:

The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers' incomes were falsified or inflated, the Times reported.

Fannie Mae and Freddie Mac lost more than $30 billion, due partly to their purchases of mortgage-backed securities, when the housing bubble burst in late 2008. Those losses were covered mostly with taxpayers' money.

http://news.yahoo.com/u-sue-big-banks-over-mortgage-securities-report-031719348.html


well now isn't this just wonderful?

the federal government passed legislation to make these loans available for people who coulon't afford them and are now sueing the banks because the banks followed the rules set up by the feds on these loans.

nothing like creating a problem and then capitalizing on it..

[MMC]

Isn't that the way Greenspan set it up?

[MMC]

Isn't that the way Greenspan set it up?


Hiya Lo.....how ya doing tonight?

[waltky]

US Sues Bank Of America...
:cool2:
U.S. sues Bank of America for more than $1 billion for mortgage fraud
10/24/2012 — The top federal prosecutor in Manhattan sued Bank of America for more than $1 billion on Wednesday for mortgage fraud against Fannie Mae and Freddie Mac during the years around the financial crisis.


U.S. Attorney Preet Bharara said Countrywide Financial, which was later bought by Bank of America, churned out mortgage loans from 2007 to 2009 without making sure that borrowers could afford them. "The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope," Bharara said in a statement. He said the suit was partly to recover money that Fannie and Freddie lost from defaulted loans. Bank of America had no immediate comment.

Countrywide sold the loans to Fannie Mae and Freddie Mac, which were left to pay for the loans when they defaulted, according to the lawsuit. Fannie and Freddie were effectively nationalized in 2008. According to the lawsuit, Countrywide used a process called "the Hustle," shorthand for "High-Speed Swim Lane." The idea was that mortgage loans, as they were being processed, would "move forward, never backward." The lawsuit alleged that Countrywide traded quantity for quality and eliminated underwriters, even from mortgage loans for which borrowers did not have to get their income verified.

Instead, loan processors simply entered data into an automated underwriting system, and if the system gave the go-ahead, "no underwriter would ever see the loan," the lawsuit alleged. With few checks and balances, there was "widespread falsification" of the data entered into the program, Bharara charged.

Loan processors were given little guidance, the suit said: Checklists for making sure that loans were compliant — for example, assessing whether the income level that a borrower listed was reasonable — were eliminated. Bonuses were based solely on how many loans an employee could process, not the quality.

MORE (http://www.tulsaworld.com/business/article.aspx?subjectid=51&articleid=20121024_51_0_NEWYOR78820)