Bank of America faces steep penalty for Countrywide’s transgressions

Ben Protess writes in the New York Times (10/26, Protess, Subscription Publication, 1.23M) “DealBook” blog, “When Bank of America bought Countrywide Financial, the subprime lending specialist, it initially paid $4 billion. Some analysts have pegged the true financial toll – including write-downs, legal expenses and settlements – at upward of $40 billion. The costs threatened to widen further on Wednesday, when federal prosecutors in New York sued Bank of America over a mortgage program it inherited from Countywide. The Justice Department seeks to collect more than $1 billion in penalties over the program, known as ‘the hustle,’ which prosecutors say churned out fraudulent loans at a rapid pace. The final cost of that suit could total even more – $3 billion.” DOJ says Countrywide and BofA sold mortgages they knew were bad to Fannie Mae and Freddie Mac.

Bank of America employees may face charges in Federal civil fraud case. Reuters (10/26, McCool, Stempel) reports that some employees of Bank of America Corp. may face civil fraud charges as part of the Federal lawsuit accusing the bank of causing more than $1 billion in losses to U.S. taxpayers by selling toxic mortgage loans to Fannie Mae and Freddie Mac. During a hearing in Federal court in Manhattan on Thursday, Assistant U.S. Attorney Pierre Armand told U.S. District Judge Jed Rakoff that the government may modify its complaint to include individuals who are current or former employees of Bank of America.