Posted Oct 24, 2012 05:25 pm CDT
The Justice Department announced Wednesday a mortgage fraud lawsuit filed against Bank of America, alleging that the corporation engaged in a scheme to defraud federal loan programs Fannie Mae and Freddie Mac.
According to a press release from Preet Bharara, the U.S. attorney for the Southern District of New York, the defendants implemented a new-loan origination process called the “Hustle,” which was designed to process loans quickly, without quality checkpoints.
That generated “generated thousands of fraudulent and otherwise defective residential mortgage loans” sold to Fannie Mae and Freddie Mac, according to the release. The loans defaulted, causing more than $1 billion in losses.
Also named as defendants are Countrywide Financial Corp. and Countrywide Home Loans, which Bank of America acquired. According to the release, Countrywide originated the “Hustle” policy, which Bank of America adopted after acquiring Countrywide in 2008.
The action (PDF) seeks more than $1 billion in damages under the False Claims Act and the Financial Institutions Reform Recovery and Enforcement Act, the release states. It’s reported to be the Justice Department’s first civil fraud action brought regarding mortgage loans sold to Fannie Mae and Freddie Mac.
Steve A. Linick, the Inspector General of the Federal Housing Finance Agency, and Christy L. Romero, the Special Inspector General for the Troubled Asset Relief Program, jointly announced the lawsuit today with Bharara.