BofA should cover U.S. losses on seven mortgages, watchdog says
A federal watchdog agency said Bank of America Corp. should reimburse the government for losses on certain mortgages issued by Countrywide Financial Corp., the high-risk home lender that BofA acquired in 2008.
The inspector general’s office of the Department of Housing and Urban Development audited 14 loans granted by Countrywide and determined that half of them contained “material underwriting deficiencies.”
The Federal Housing Administration, which is a unit of HUD, provides insurance to lenders against mortgage losses. The report said that because the seven loans became delinquent, HUD paid out more than $720,000.
According to the report, the loan files contained incorrect information on borrowers’ employment status, income, credit status and other factors.
In one case, a borrower’s monthly income was listed as $6,192, but auditors concluded that it was only $4,377.
In another, Countrywide didn’t include a borrower’s monthly liabilities to a utility company and a credit card company — details available in the individual’s credit report.
The HUD audit also said that Countrywide charged four borrowers a total of more than $3,000 in “unreasonable costs” to close their mortgages. And the report said borrowers who refinanced were allowed to skip mortgage payments, which is prohibited by HUD.
Countrywide, which was a leader in granting subprime mortgages, nearly collapsed under the weight of defaults in 2007. It was acquired by BofA in 2008.
The report included a rebuttal by BofA Senior Vice President Linda Jacopetti, who said the bank should not be held accountable for Countrywide’s actions.
The policies, procedures and loans that the audit focused on “were born of an entity that no longer exists and operates,” she wrote.
HUD said in the report that both Bank of America’s and Countrywide’s quality control programs didn’t fully follow HUD requirements.
The report said that BofA should reimburse the government for the $720,000 in losses from the seven loans.
In a matter related to BofA’s acquisition of Countrywide, the bank said Tuesday that it would close one of its mortgage units by the end of the year after failing to find a buyer.
The correspondent lending business, which bought home loans from smaller lenders, went up for sale Aug. 31.
The unit, with 1,200 employees, was formerly part of Countrywide.
