Written by Biloxi
Oh a tangle we weave. Is Countrywide fibbing on the rest of the banks? It really boggles the mind. We are talking about Countrywide who handed out fraudulent 'liar loans.' What are 'liar loans?' 'Liar loans' or simply state income loans are loans which the borrower doesn’t have to verify his or her income. This is the same company in which once upon of time was a $500 billion dollar mortgage company owned by Angelo Mozillo, CEO and a son of butcher from Bronx, New York that went bankrupt in 2008 and acquired by Bank of America. Now, this same company is insisting other lenders made state income loans or 'liar loans' and urges them to buy back the bad mortgages. Interesting enough, , Mr. Mozillo actually admitted to analysts, “I believe there is a lot of fraud in stated-income loans.” Yet, Mr. Mozillo's company participated in the state-income fraudulent loans.
No one can forget the Countrywide whistleblower, Mark Zachary, regional vice president of Countrywide in Houston, Texas who warned his superiors of the shady and illegal practices. Mr. Zachary sued Countrywide for wrong termination of his job a few years ago. From MSNBC:
"In February 2007, after six months on the job, Zachary warned superiors about the potential effects of bad lending practices, writing:
'In a market where there are more foreclosures and defaults than we care to talk about, I think part of that is because some builders and lenders are setting people up for further failure in life by putting them in loans and houses they do not belong in.'"
You can't blame Bank of America to quickly refuse to buy back bad mortgages since Bank of America inherited Countrywide's fraudulent mess. Bank of America is feeling the pressure from investors that demanding Bank of America to buy back bad mortgages. You can't blame Bank of America for trying to starve of the investors' demands. After all, Bank of America services 14 million home mortgages and 10 million of which came from Countrywide. Bank of America, President of Home Loans, Barbara Desoer, handles the Countrywide unit and now deals a large volume of default loans and faces series of lawsuits by mortgage holders and investors. As you may recall, Ms. Desoer testified to the Senate committee last week and gave an eye opening testimony that Bank of America owns 23% of their own mortgage loans and 77% of mortgage loans are owned by investors. And Brian Moynihan, Bank of America CEO, faces scrutiny with the shareholders from a dramatic drop in value of shares while trying to deal with the loan modifications and foreclosure mess and trying to clean up Countrywide's mess.
It's clearly that Bank of America are drowning in Countrywide's debt and left holding the bag. Unfortunately, Bank of America can't dig themselves out of this mess with a government bailout since President Obama signed in law the Financial Reform Bill this year which bans a bailout and can force a failing bank to be broken up. Is Bank of America "too big to fail?" Time will tell. Since investors own 77% of Bank of America's mortgage loans, Bank of America better hope that the investors don't stop guarantee their loans. If Fannie Mae and Freddie Mac were to stop guaranteeing Bank of America’s mortgages, Bank of America would be out of the mortgage business. What if the investors stop guaranteeing all of the large mortgage servicers? That would be devastating to the big banks. I certainly see Bank of America and other banks eventually buying back the 'liar loans’, not because the banks have to but because evidence of fraud continue to surfaces enough that they don't have a choice.
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