October 25, 2012 10:32:39 AM
NEW YORK -- The latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.
The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America's purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.
The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages.
"This lawsuit should send another clear message that reckless lending practices will not be tolerated," Bharara said in a statement. He described Countrywide's practices as "spectacularly brazen in scope."
He also charged that Bank of America has resisted buying back soured mortgages from Fannie Mae and Freddie Mac, which bought loans from Countrywide.
Bank of America spokesman Lawrence Grayson said the bank "has stepped up and acted responsibly to resolve legacy mortgage matters." He called the allegation that the bank has failed to buy back loans "simply false."
"At some point," Grayson said, "Bank of America can't be expected to compensate every entity that claims losses that actually were caused by the economic downturn."
Countrywide was a giant in mortgage lending, but was also known for approving exotic, even risky, loans.