Police in riot gear gather outside Bank of America Plaza in Los Angeles on November 17, 2011.Police arrested 47 people, including two who tried to break through a police line and were arrested on suspicion of assault on a police officer. The others were arrested on suspicion of trespassing. UPI/Jim Ruymen |
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NEW YORK, Oct. 24 (UPI) -- U.S. prosecutors Wednesday sued Bank of America Corp., accusing the bank of costing taxpayers more than $1 billion with a mortgage scheme called "the Hustle."
The civil mortgage fraud lawsuit suit against Bank of America Corp. and its predecessors, Countrywide Financial Corp. and Countrywide Home Loans Inc., seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 for an alleged scheme to defraud the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp.
Prosecutors say Countrywide, and later Bank of America, implemented "the Hustle" -- a new loan origination process -- from at least 2007 through 2009, making "disastrously bad loans and [sticking] taxpayers with the bill."
The alleged scheme was designed to process mortgage loans "at high speed and without quality checkpoints," generating thousands of "fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae and Freddie Mac that later defaulted, causing over $1 billion in losses and countless foreclosures," prosecutors said.
"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," U.S. Attorney Preet Bharara said in a statement. "The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope."
The complaint accuses Countrywide and BofA of eliminating quality controls, incentivizing corner-cutting by "unqualified personnel" and concealing defects in loans.
"These toxic products were then sold to the government sponsored enterprises as good loans," the release said.
The lawsuit announced Wednesday is the first involving Fannie Mae and Freddie Mac, which were taken over by the federal government following massive losses during the financial meltdown.
Bank of America agreed to an $8.5 billion settlement in 2011, in which it compensated other investors who sustained losses in fraudulent mortgage securities, CNN reported.
