The U.S. Attorney General’s office is seeking to more than double the fines Bank of America faces for fraudulent mortgages that helped lead to the financial crisis.
The federal government is asking for $2.1 billion in damages, the total amount it says Bank of America’s Countrywide unit received for its defective loans from Fannie Mae and Freddie Mac in 2007 and 2008. The new number is a substantial increase from the $863 million plaintiffs had sought, representing the amount they say Fannie and Freddie lost from the loans in 2007 and 2008.
A jury has already found Bank of America, which subsequently bought Countrywide, liable. After that decision, the judge setting the penalty asked the parties for Countrywide’s gains rather than the Fannie and Freddie’s losses.
Morningstar financial analyst Jim Sinegal points out that Bank of America is worth $180 billion. He says the bank has so much in reserve for litigation, another billion dollars in fees "in perspective, is not that much."
But, Sinegal says the filing is concerning for reasons other than cost.
"It shows that the bank’s legal problems aren’t over yet. We’ve been waiting for them to end for awhile," he says. "And I think there are cultural implications."
Bank of America bought Countrywide in 2008, inherited the legal trouble caused by its bad mortgages, and, Sinegal says, the staff that created them.
In response to the new filing, Bank of America released the following statement:
“This claim bears no relation to the limited Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company. We will present the relevant facts in a detailed response soon.”
The bank’s deadline to respond in court is February 26th.