The U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG), conducted a review of loans underwritten by Countrywide Home Loans Inc., and its divisions Countrywide Bank FSB and Countrywide Mortgage Ventures, LLC. The objective of the review was to determine whether Countrywide underwrote Federal Housing Administration (FHA) loans in accordance with HUD-FHA regulations.
Countrywide is a subsidiary of Bank of America, Charlotte, NC. Bank of America acquired Countrywide on January 11, 2008. Countrywide’s FHA approval was voluntarily terminated on September 2, 2010. To address our review objective, we selected a statistical sample of 110 loans from a universe of 8,724 FHA-insured loans, which Countrywide had closed between January 1, 2003, and December 31, 2009, and that met specific loan default criteria. We reviewed the 110 statistically selected loans and referred our findings to the U.S. Attorney’s Office of the Eastern District of New York. Bank of America and its affiliated entities decided to enter into a settlement agreement with the U.S. Department of Justice. The consent judgment stated that the parties agreed to resolve their claims without the need for litigation and that Bank of America did not admit the allegations of the complaint other than those facts deemed necessary to the jurisdiction of the court. On April 4, 2012, the U.S. District Judge for the District of Columbia approved the consent judgment, which was based in large part on our review of the 110 statistically selected FHA loans. As a result, Bank of America paid FHA nearly $471 million to settle the Countrywide portion of the consent judgment.
Bank of America and its affiliated entities also agreed to a deferred settlement payment to FHA of $850 million. The $850 million is deferred for 3 years from the effective date of the consent judgment to allow Bank of America to conduct a one-time, nationwide modification program to be offered to underwater borrowers with economic hardship on first-lien loans. Bank of America will have no obligation to make the $850 million deferred settlement payment to FHA if it satisfactorily completes the stipulations of the modification program.