Oct 24, 2012
Civil suit accuses bank of selling dodgy mortgages to government-controlled financiers Fannie Mae and Freddie Mac
Bank of America defrauded the US government in a scheme called “the hustle”, federal prosecutors alleged on Wednesday as they sued the bank $1bn in compensation.
The justice department filed a civil complaint in New York seeking recompense for some of the massive losses suffered by quasi-government controlled mortgage finance firms Freddie Mac and Fannie Mae following the collapse of the ill-fated housing boom.
In a scheme that was “spectacularly brazen in scope” Preet Bharara, US attorney for the southern district of New York, said the bank “made disastrously bad loans and stuck taxpayers with the bill”.
The charges relate to Countrywide Financial, once the largest seller of sub-prime home loans. Countrywide was bought by Bank of America for $2.5bn in 2008 as the loan firm headed toward collapse. It has since cost the bank tens of billions of dollars in write-offs for bad loans, legal costs and settlements with government agencies.
Bharara charges that the Bank of America continued Countrywide’s abusive practices even after the purchase. “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,” he said.
To read more about this landmark suit against Bank of America for its part in defrauding homebuyers and mortgage applicants, please click here