United States v Bank of America Corp

Reuters Full Article Here:

(Reuters) – The United States filed a fraud lawsuit against Bank of America Corp, accusing it of causing taxpayers more than $1 billion of losses by selling thousands of toxic mortgage loans to Fannie Mae and Freddie Mac.

Wednesday’s case, originally brought by a whistleblower, is the U.S. Department of Justice’s first civil fraud lawsuit over mortgage loans sold to the big mortgage financiers, which were bailed out in 2008.

It also compounds the legal problems that Bank of America Chief Executive Brian Moynihan faces over the second-largest U.S. bank’s disastrous July 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 and Bank of America continued a scheme known as the “Hustle” 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.

This led to “defect rates” that approached 40 percent, roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to “rebut” the problems being found, it added.

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