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Prosecutors Say Bank’s Mortgage Fraud Cost Government $1B

A federal lawsuit filed recently by officials with the U.S. Department of Justice alleges that mortgage fraud committed by Bank of America and subsidiary Countrywide cost the government – i.e., taxpayers – $1 billion.

Miami foreclosure lawyers understand the government has filed suit against the companies, seeking payment of damages.

We hope this lawsuit will be the first of many filed by the government in the coming months and years, as officials continue to dig deeper into the mortgage mess that spurred an economic crisis with national and global implications.

The basis for the suit is the False Claims Act, found in 31 U.S.C. 3279-3733. It’s also sometimes referred to as the “Lincoln Law.” It was first passed back in the 1800s (under the Lincoln administration), but it has been modified several times since. Primarily, claims have been brought against military, health care institutions and other large programs that use or rely on federal dollars. Essentially, it establishes civil liability for any person or entity that improperly receives money from the government or fails to pay the government what it is owed. It’s not so much tax fraud as it is making false claims of record in order to be paid or to avoid payment. Since the act was first established, the government has collected $22 billion worth of ill-gotten or ill-kept gains from a variety of entities.

In 1986, after significant reform, it was primarily used against government contractors. In 2009, it was revised again to include a number of provisions specifically relating to the actions of large financial institutions.

The 2009 amendments came under the Fraud Enforcement and Recovery Act. Specifically, those provisions include expansion of conspiracy liability, increased protection for qui tam plaintiffs (individuals who bring suit alongside the government) and effectively overturned a U.S. Supreme Court regarding the presentment requirement.

This action is separate from the $25 billion mortgage fraud settlement struck earlier this year with attorneys general from 49 states and five of the biggest banks in the country, including Bank of America. In fact, that earlier deal does not stop the government – or anyone else – from filing future civil cases based on mortgage fraud and other abuses.

This case is about the way in which both Bank of America and subsidiary Countrywide systematically skirted regulatory control over mortgage loans backed by government housing agencies Fannie Mae and Freddie Mac. In doing so, they covered up the fact that these loans were actually extremely risky investments. When the market collapsed, the government was the one stuck holding the tab.

The primary prosecutor in the case called the scheme, known internally as “The Hustle,” a “spectacularly brazen” form of fraud.

Though $1 billion seems like quite a bit, consider the fact that following the burst of the housing bubble, the federal government had to pump some $180 billion into both agencies just to keep them operational. Economists believe most of that money won’t ever be recovered.

Although Bank of America didn’t control Countrywide at the time the alleged scheme first started in 2007, prosecutors say BofA knowingly continued this fraud long after it acquired Countrywide.

The mantra of those who were running the hustle were that loans were to “move forward, never backward,” regardless of how risky they were or whether or not homeowners had any realistic hope of repaying them.

What all of this shows is that homeowners who are fighting foreclosure are up against an expansive and elaborate web of bureaucracy that uses power and influence to blatantly break the law. These financial institutions are not above playing dirty in lawsuits. You need someone who is experienced and can effectively battle for your best interests.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal 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.

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