Bank of America was sued today for more than $1 billion in multi-year mortgage fraud against Fannie Mae and Freddie Mac. The suit follows a billion-dollar charge in October against Wells Fargo for misleading lending practices and faulty underwriting.
The loans in question were written in part under Countrywide, later acquired by Bank of America, and came through the bank’s “hustle” program, the U.S. Attorney for the Southern District of New York alleges. The new suit follows the a billion-dollar suit against Wells Fargo for FHA lending as well as a landmark $25 billion mortgage servicing settlement announced in February 2012 involving the nation’s largest mortgage lenders.
“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,” said Manhattan U.S. Attorney Preet Bharara. “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.”
The suit marks the first civil suit brought by the Department of Justice concerning loans sold to Fannie or Freddie.
“To prevent fraud, conducting quality reviews and complying with underwriting standards are critical,” said Federal Housing Finance Agency Inspector General Steve Linick. “Countrywide and Bank of America allegedly engaged in fraudulent behavior that contributed to the financial crisis, which ultimately falls on the shoulders of taxpayers. This type of conduct is reprehensible and we are proud to work with our law enforcement partners to hold all parties accountable.”
Written by Elizabeth Ecker