Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Nye Lavalle
FBI Investigates Countrywide
U.S. Scrutinizes Filings
On Financial Strength,
Loan Quality for Fraud
By GLENN R. SIMPSON and EVAN PEREZ
March 8, 2008; Page A3
WASHINGTON -- The Federal Bureau of Investigation is probing subprime lender Countrywide Financial Corp. for possible securities fraud, according to law-enforcement officials and finance-industry executives.

The inquiry involves whether company officials made misrepresentations about the company's financial position and the quality of its mortgage loans in securities filings, four people with knowledge of the matter said. It is at an early stage, they emphasized.

"We are not aware of an investigation being conducted by the FBI," Countrywide spokeswoman Jumana Bauwens said in an e-mail. A spokesman for Bank of America Corp., which is in the midst of acquiring Countrywide, declined to comment.

Fifteen other subprime companies also are under scrutiny by federal agents and prosecutors in a broad look at the subprime industry sparked by huge losses on residential mortgages and the securities used to fund them. The investigations are examining mortgage-origination fraud, conflicts of interest and undisclosed relationships within the industry, and the practices used to package mortgage-backed securities for sale to investors.

Countrywide issued more than $100 billion in mortgage-backed securities between 2004 and 2007, according to the newsletter Asset Backed Alert. More than two dozen Wall Street firms helped construct those deals, making it possible that some of them will also face law-enforcement scrutiny.

While Countrywide is based in Calabasas, Calif., near Los Angeles, the inquiry is being handled in New York and overseen in Washington, people familiar with the matter said. Federal prosecutors in New York have primary jurisdiction over securities-fraud cases, while FBI and Justice Department officials are coordinating the subprime probes here.

Federal investigators are looking at evidence that may indicate widespread fraud in the origination of Countrywide mortgages, said one person with knowledge of the inquiry. If borne out, that could raise questions about whether company executives knew about the prospect that Countrywide's mortgage securities would suffer many more defaults than predicted in offering documents.

Another potential issue facing the company is whether it has been candid in its accounting for losses. People familiar with the matter said that Countrywide's losses may be several times greater than it has disclosed.

Countrywide, which agreed in January to be acquired by Bank of America for $4 billion, already is under investigation by the Securities and Exchange Commission for possibly improper accounting. SEC investigators are working closely with FBI agents on several subprime investigations, officials said. The attorneys general of Florida and Illinois have launched probes too.

Countrywide also is the subject of a class-action, securities-fraud civil lawsuit by various government pension funds and their managers, including the city and state of New York. The lawsuit identifies more than 25 firms that helped Countrywide package and sell mortgage-backed securities, including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Lehman Brothers Holdings Inc. The firms have denied any wrongdoing.

Countrywide "misled investors by falsely representing that Countrywide had strict and selective underwriting and loan origination practices, ample liquidity that would not be jeopardized by negative changes in the credit and housing markets, and a conservative approach that set it apart from other mortgage lenders," the suit alleges.

At its peak, Countrywide was the nation's biggest home lender, originating more than $450 million in mortgages annually, or about one-fifth of all home loans. Its "servicing portfolio" of mortgage loans exceeds $1 trillion. Last month, Countrywide disclosed that its losses for the fourth quarter of 2007 were $422 million, more than double the estimate of analysts.

There is no indication that Bank of America, now conducting due diligence at Countrywide, is having second thoughts about completing the acquisition. In fact, people familiar with the matter said Bank of America is rushing to close the Countrywide acquisition as quickly as possible, perhaps in August.
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Stephen

Music to my ears!!!!  Everything CW did was fraud.

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4 justice now
If these guys would have acted when the fraud was first brought to their attention years ago it would have never gotten to this point. I think the FBI should do some investigating of their own upper management as well.

That said... It's good to see that someone other than the victimized homeowners is being looked at. Although, I seriously doubt any one responsible for the fraud will ever see the inside of prison, certainly not a real prison anyway. Just the same old tired story.

JMO,

4J
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I am happy to see that the FBI is investigating Countrywide home loans and their connecting companies. I wish they would look at what is being done currently as well as in the past to homeowners by this company. It may not surprise them to find out that there may be FHA fraud, VA fraud, but also violations with RESPA, HUD and discrimination of those with disabilities when it comes to Countrywides involvement. I should know. We are in the loop hole of Countrywide here in our state. They started our loan process the last week of January 2008, we did the paperwork and appraisal on Feb 5, 2008 and were told we would close in 21 days. Our closing was then set to March 7. The day of the closing, they said we could not qualify because my husband is on disability and it only showed he was disabled. We had the doctors provide a letter the same day stating he is permanently disabled, and they, at Countrywide have yet to return our calls. Hard working Americans are being taken for a ride by this company and many like it and there needs to be laws put in place to protect people from their crimes. Slaps on the wrist, and broken promises do not and will not fix this country. We have the greatest Government in the world, laws have been written to protect us, such as the ADA Laws, FHA LAWS, HUD, and the Truth in Lending Laws. Lending companies, Banks, Mortgage Companies, Title companies, etc, should all have to adhere to the same rules and regulations as Brokers and Affiliates in Real Estate, since they act and conduct business in the same area. All those who deal with real estate, loan companies, money lenders, etc, should be licensed, have to pay the fees as Realtors, and should have to answer to the same punishments when it comes to fraud, misrepresentation, discrimination, and plan out falsification of documents, etc. I am glad as I said to see the FBI taking a step toward fighting the Countrywide home loan crooks as they are in many Americans eyes, and I hope they catch them red handed with their hand in the cookie jar. I for one would love to help stop them in their track!!

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Stephen

Got my fingers crossed that CountryWide will be the first indictment for racketeering, to be followed by all the others.

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mindymouse
I remember seeing this same title for EMC and yet.. they are still at it.
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