FDIC chief Sheila Bair, who spearheaded loan modification efforts early on at failed institutions such as Indymac, received a rather interesting mortgage from Bank of America last summer, according to a report from The Huffington Post Investigative Fund.
Her family reportedly purchased a $1.1 million home in the Maryland suburbs in July, borrowing $898,000 from Bank of America.
At the same time, they refinanced their former home in Amherst, Massachusetts as a second home (or vacation property).
Only problem is the “second home” is a duplex, and Bank of America doesn’t seem to permit financing on multi-unit second homes.
It would need to be declared as an investment property, which is subject to a higher interest rate and more financing restrictions that may have killed the deal entirely.
If you think the duplex issue is a simple oversight, consider the fact that she also rents out the “second home,” bringing in between $15,000 and $50,000 annually as a result, per her most recent financial disclosure.
The loan documents tied to the “second home” included a rider stating it was to be used for their “exclusive use and enjoyment” and could not be used as a rental property.
Also consider that this type of scenario is a common type of occupancy fraud, whereby borrowers claim a property is a second home instead of an investment property to qualify or obtain a lower mortgage rate.
Not only that, but she met with the Charlotte-based bank regarding bailout talks in the weeks between the closings of her two mortgages (Bank of America wound up with $45 billion, the second most of any bank).
To resolve that issue, the FDIC gave her a retroactive waiver, as the agency prohibits employees from participating in any matters involving a bank seeking a loan.
It works from the top down folks…