Countrywide Financial Corp., and the mega bank that bought it, Bank of America, sold thousands of fraudulent and defective loans to Fannie Mae and Freddie Mac, eventually leaving taxpayers saddled with roughly $1 billion in losses, according to a new lawsuit from the government.
U.S. attorney Preet Bharara Wednesday unveiled new civil claims against
In particular, B of A continued into 2009 a high speed loan processing program dubbed ‘The Hustle’ that started at Countrywide, according to the civil mortgage fraud lawsuit (U.S. v. Bank of America/Countrywide) filed in the U.S District Court in Lower Manhattan.
In processing the loans, “they cast aside underwriters, eliminated quality controls and incentivized unqualified employees to cut corners,” Bharara said. “The fraudulent conduct alleged in [the] compliant was spectacularly brazen in scope.”
Countrywide and B of A sold "The Hustle" loans with representations and warranties to assure Fannie and Freddie that the mortgages were good and met GSEs underwriting standards.
“After the loans defaulted, Bank of America has resisted buying many of them back, despite the presence of fraud, misrepresentation and other obvious violations of GSE requirements,” the U.S. attorney’s office said.
Countrywide was Fannie’s biggest customer for many years, according to reporting by National Mortgage News.
The U.S. attorney is seeking treble damages and penalties under the False Claims Act for the losses Fannie and Freddie have suffered.
Late Wednesday B of A issued a statement on the suit saying it “has stepped up and acted responsibly to resolve legacy mortgage matters; the claim that we have failed to repurchase loans from Fannie Mae is simply false. At some point, Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”
