U.S. Bank sues Bank of America over misrepresented loans

U.S. Bank is suing Countrywide Financial Corp. (which is now part of Bank of America) for breach of contract. Countrywide was supposed to repurchase more than 4,000 mortgages in which it misrepresented the quality of the loan.

To put it simply: Countrywide made loans allegedly without checking the quality of the borrowers. It then sold those loans, claiming they were all high-quality. They eventually ended up with HarborView Trust, of which US Bank is a trustee.

According to the court filing, “Soon after being sold to the trust, Countrywide’s loans began to become delinquent and default at a startling rate. During the time period in which Countrywide originated the loans, it completely ignored its underwriting guidelines.”

In fact, when US Bank examined a sample of the $1.75 billion in loans, it found that 66 percent of them “conflict with representations made by Countrywide.” I.e., they were “toxic.” And part of the sale required that Countrywide repurchase any loans in which it, shall we say, overstated the quality.

Well, Countrywide/Bank of America hasn’t done that yet, and now US Bank is suing to force it to buy them all back. Bank of America had no comment on the suit.

Click here to read the whole story from Bloomberg.

About Andrew Kantor

Andrew is VAR's editor and information manager, and -- lessee now -- a former reporter for the Roanoke Times, former technology columnist for USA Today, and a former magazine editor for a bunch of places. He hails from New York with stops in Connecticut, New Jersey, Cincinnati, Columbus, and Roanoke.
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One Response to U.S. Bank sues Bank of America over misrepresented loans

  1. Sarah Stelmok says:

    Not that Countrywide is not at fault, but what kind of investor is US Bank if they don’t check the quality of the loans themselves. It’s not like it was a secret that Countrywide was bending the guidelines so that more borrowers could obtain loans. Heck, US bank has their own issues when it comes to issuing bad loans.

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