Federal prosecutors sued Bank of America on Wednesday, claiming that the Charlotte-based bank carried a mortgage scheme on from Countrywide Financial that defrauded the government through the depths of the financial crisis.
According to the New York Times, Countrywide, which Bank of America acquired in 2008, began a home-loan program known as the "hustle" in 2007 "that was designed to churn out mortgages at a rapid pace without proper checks on wrongdoing." Bank of America continued the program through 2009 and sold the “defective” loans to Fannie Mae and Freddie Mac, the government-controlled housing giants, which were stuck with hefty losses and foreclosed properties. According to the Times:
“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bharara, the United States attorney in Manhattan, said in a statement. Mr. Bharara brought the case with the inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, and the government watchdog for the bank bailout program.
The case is the latest legal headache for Bank of America over its acquisition spree during the crisis. The bank in September paid $2.4 billion to settle a securities class-action lawsuit that it misled investors about the takeover of Merrill Lynch.
Read the Times' story here.