Thursday, February 9, 2012

Largest False Claims Act Settlement Relating to Mortgage Fraud: Bank of America

The $25 billion settlement reached announced today between the federal government and state attorneys general with the five largest mortgage service companies (Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC)) also included a $1 billion False Claims Act settlement.  Specifically, Bank of America and various Counrywide entities agreed to pay $1 billion to resolve a separate investigation relating to the whether these entities "knowingly made loans insured by the Federal Housing Administration (FHA) to unqualified home buyers" which, in turn, caused the FHA to incur "hundreds of millions of dollars in damages as a result of this conduct."   Additionally, the False Claims Act investigation also encompassed "allegations that the bank and Countrywide defrauded the FHA insurance fund by originating mortgage loans that were based upon inflated appraisals."   That investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG. The U.S. Attorney for the Eastern District of New York, Loretta Lynch, announced that it was "the largest ever False Claims Act settlement relating to mortgage fraud."

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