In massive foreclosure fraud settlement, $1 billion for U.S.

by Ben Vernia | February 9th, 2012

The Department of Justice announced today a $25 billion settlement of foreclosure fraud allegations between the five largest mortgage services, the federal government, and 49 states. Although most of the settlement money is earmarked for homeowner relief of various forms, buried in DOJ’s press release is a description of $1 billion of the total, which the federal government will receive in exchange for releasing the services from liability for defrauding the U.S.:

The $5 billion includes a $1 billion resolution of a separate investigation into fraudulent and wrongful conduct by Bank of America and various Countrywide entities related to the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009. Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages. This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG. The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program.

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