Audit suggests BofA should face fraud claims related to Countrywide loans

Bank of America should face fraud claims because its Countrywide unit
submitted faulty data in claims for reimbursement of federally
insured mortgages, according to an audit by the Department of Housing
and Urban Development, Bloomberg News reported.

“Countrywide did not properly verify, analyze, or support borrowers’
employment and income, source of funds to close, liabilities and
credit information,” a HUD regional inspector general wrote in the
audit. “This noncompliance occurred because Countrywide’s underwriters
did not exercise due diligence in underwriting the loans.” HUD runs
the Federal Housing Administration, which insures mortgages on loans
to borrowers who can’t find traditional financing, such as those with
low incomes

The U.S. has already sued Deutsche Bank for similar claims in May.

Bank of America “adheres to HUD regulations and has taken the audit
findings seriously,” Rick Simon, a company spokesperson, said in an
e-mailed statement. “This audit took place over a year ago and
pertains to loans originated under Countrywide operations, policies
and procedures. Bank of America believes the loans generally complied
with FHA underwriting requirements, were made to qualified FHA
borrowers, and that Countrywide adhered to a written quality control
plan.”

HUD’s inspector general identified 4,050 Countrywide loans originated
between July 1, 2008, and May 26, 2009, that were at least 60 days
overdue within their first six mortgage payments.

In a 35-page response to HUD dated July 19, Linda Jacopetti, Bank of
America senior vice president, acknowledged that “oversights may have
occurred in some instances” and said the unit didn’t intentionally
disregard FHA guidelines. There were “isolated occurrences in a
handful of cases among thousands of FHA loans originated” in that
time, she said.

A separate report by an inspector general alleged that CitiMortgage, a
unit of Citigroup, improperly submitted claims of almost $5 million,
which should be returned to HUD, according to the audit, which covered
2011. [Bloomberg]