Feds Slap BofA With $1B Mortgage Fraud Lawsuit
October 25, 2012
Federal prosecutors filed a $1 billion lawsuit against Bank of America, alleging the bank giant from 2007 through 2009 had a program in place to file mortgage applications at a quick speed that disregarded checking for fraud, misstatements, or wrongdoing in the applications.
The loan origination program at the bank was known as the “Hustle,” according to federal prosecutors, and started under Countrywide Financial and Countrywide Home Loans, which the bank acquired in 2008.
According to the lawsuit, many of the loans stemming from “Hustle” program were sold to Fannie Mae and Freddie Mac and later defaulted, costing $1 billion in losses and resulting in thousands of foreclosures.
"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill," said Preet Bharara, Manhattan U.S. attorney. The lawsuit was filed by the Manhattan U.S. Attorney’s office. "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."
A spokesman for Bank of America told USA Today that Bank of America has repurchased some of the loans that turned sour, making an effort to resolve mortgage matters responsibly. However, the bank can’t be expected to “compensate every entity that claims losses that actually were caused by the economic downturn,” Lawrence Grayson, spokesman with Bank of America, told USA Today.
Source: “Feds Sue Bank of America for 'Hustle' Loan Fraud,” USA Today (Oct. 24, 2012)
Updated: May 14, 2021