UPDATE 1-BofA under investigation over U.S. housing program, forex
By Peter Rudegeair
Feb 25 (Reuters) - Bank of America Corp said on Tuesday that federal investigators are looking into whether the bank violated requirements of a U.S. government housing program.
The civil division of the Brooklyn U.S. Attorney's Office for the Eastern District of New York is investigating Bank of America's compliance with the rules of the Federal Housing Administration's Direct Endorsement Program, according to the bank's annual report with the U.S. Securities and Exchange Commission.
The Charlotte, North Carolina-bank also said in the filing that government authorities in North America, Europe and Asia are investigating the bank's conduct and practices in foreign-exchange markets as part of a broader industry inquiry.
Under the FHA's Direct Endorsement Program, mortgage lenders like Bank of America are given the authority to approve home loans that the federal government then insures without further review. If the mortgage defaults and it is later determined that the lender did not follow FHA underwriting standards, the FHA can then demand to be reimbursed for any losses.
Spokesmen for Bank of America and the Brooklyn U.S. Attorney's Office declined to provide additional details on the probe.
The program has been at the center of many cases brought by the Manhattan U.S. Attorney's office. In 2012, Citigroup Inc agreed to pay $158.3 million and Deutsche Bank AG agreed to pay $202.3 million to settle related claims.
JPMorgan Chase & Co agreed in early February to pay $614 million to settle claims that it defrauded the FHA and the Department of Veterans Affairs by making sub-standard mortgage loans.
In February 2012, Bank of America agreed to $1 billion in payments to the federal government to settle claims that its Countrywide home loan subsidiary made FHA-insured mortgages to unqualified borrowers. The settlement covered FHA loans made prior to April 30, 2009.
Bank of America also boosted its estimate for possible losses on top of what it has already put aside to cover litigation expenses. The bank said in the filing that litigation losses may exceed reserves by up to $6.1 billion, up from an estimate of $5.1 billion at the end of the third quarter.