BAC Should Face Fraud Charges Over Countrywide, Says Regulator

Countrywide failed to comply with government rules when it submitted paperwork to get reimbursement for mortgages insured by the government, the inspector general of the Department of Housing and Urban Development said in a report released last week. The inspector general, Kelly Anderson, said that seven of 14 loans reviewed showed “material underwriting deficiencies” because “Countrywide did not properly verify, analyze, or support borrowers� employment and income, source of funds to close, liabilities and credit information.”

Lenders like Countrywide have asked the FHA, which is part of HUD, to cover losses on loans made to low-income people.

Bank of America (BAC) “adheres to HUD regulations and has taken the audit findings seriously,” the company said in a statement, according to Bloomberg. (Countrywide is owned by Bank of America.)

In the scheme of things, the government’s losses weren’t very large: an estimated $720,000 on the sales of the properties associated with the loans. But the inspector general also recommends that the associate general counsel “pursue remedies under the Program Fraud Civil Remedies Act, where legally sufficient, against Countryside and/or its principals.”