Bank of America sued over mortgage fraud

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Bank of America sued over mortgage fraud

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US government prosecutors are going after some of those accused of selling sub-prime mortgages, the trigger for the bank meltdown that led to the financial crisis.

Bank of America faces a $1 billion civil lawsuit for fraud over the activities of the mortgage firm Countrywide, which the bank bought in 2008.

It is alleged Countrywide approved home loans for people it knew could not repay them. Those toxic loans later cost US taxpayers billions as they were dumped on the government controlled entities known as Fannie Mae or Freddie Mac that guaranteed most of the country’s mortgages.

The case, originally brought by a whistleblower, is the US Department of Justice’s first civil fraud lawsuit over mortgage loans sold to Fannie Mae or Freddie Mac.

It also compounds the problems that Bank of America, the second-largest US bank, has faced since its disastrous 2008 purchase of Countrywide Financial Corp, once the nation’s largest mortgage lender.

According to a complaint filed in Manhattan federal court, Countrywide in 2007 invented a scheme known as the “Hustle” designed to speed up processing of residential home loans.

Operating under the motto “Loans Move Forward, Never Backward,” mortgage executives tried to eliminate “toll gates” designed to ensure that loans were sound and not tainted by fraud, the government said.

“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” US Attorney Preet Bharara in Manhattan said in a statement. “This lawsuit should send another clear message that reckless lending practices will not be tolerated.”