US to Sue Bank of America for $1bn Over 'Brazen' Mortgage Fraud
Federal prosecutors are suing Bank of America for $1 billion over mortgage fraud.
The civil mortgage fraud lawsuit centers around the bank's program known as "Hustle," a program it absorbed from Countrywide Financial when it bought the company in 2008.
Ben Protess reports in the New York Times:
Prosecutors say the effort, created in 2007 but kept alive through 2009 by Bank of America, was designed to churn out mortgages at a rapid pace without proper checks on wrongdoing. The bank then sold the “defective” loans to Fannie Mae and Freddie Mac, the government-controlled housing giants, which were stuck with hefty losses and foreclosed properties.
The case marks the U.S. Department of Justice's first civil fraud lawsuit over mortgage loans sold to Fannie Mae or Freddie Mac.
Manhattan U.S. Attorney Preet Bharara said in a statement:
"For the sixth time in less than 18 months, this Office has been compelled to sue a major U.S. bank for reckless mortgage practices in the lead-up to the financial crisis. The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope. As alleged, through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As described, Countrywide and Bank of America systematically removed every check in favor of its own balance – they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects. These toxic products were then sold to the government sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated."