March 5, 2014 View entire issue of ANO         Close 

Bank of America Investigated for FHA Compliance

Bank of America is undergoing another federal probe, this time by the civil division of the U.S. Attorney’s Office of the Eastern District of New York over the bank’s alleged failure to comply with the Federal Housing Administration’s Direct Endorsement Program, Reuters reported Feb. 25.

The nation’s second largest bank revealed the investigation in its annual report filing with the U.S. Securities and Exchange Commission.

The FHA’s Direct Endorsement Program allows mortgage lenders to approve home loans insured by the federal government without undergoing review by the government. However, should these insured loans default and the FHA is able to prove that the banks did not follow underwriting standards, the agency can demand reimbursement for losses, Reuters reported.

The Direct Endorsement Program has been the focus of several cases brought against banks. Reuters reported that in 2012 Citigroup Inc. paid $158.3 million to settle such a case, and Deutsche Bank AG made a similar settlement for $202.3 million. A similar case is still pending against Wells Fargo.

Bank of America has since raised its estimate of overall litigation costs to $6.1 billion, an increase from its third quarter 2013 estimate of $5.1 billion. However, the bank will see an infusion of capital as a result of its agreement with Berkshire Hathaway for the latter to acquire a special class of the bank’s preferred stock. That deal could net the bank $2.9 billion, Reuters reported.

Share |
Email to a FriendPrinter-Friendly