Bank of America is being sued for $1 billion by the Justice Department, which alleges the bank committed fraud by selling defective mortgages.
The program in question was known within Bank of America as “the Hustle,” CNN Money reported . The mortgages were purchases by government-backed firms Fannie Mae and Freddie Mac, leading to more than $1 billion in losses for taxpayers and countless foreclosures.
The complaint, filed by the US Attorney for the Southern District of New York, is targeted at the “High-Speed Swim Lane” program, known as HSSL. The program was meant to streamline the mortgage origination process, but the government says instead it was “intentionally designed to process loans at high speed and without quality checkpoints, and generated thousands of fraudulent and otherwise defective residential mortgage loans.”
Bank of America being sued for $1 billion marks an aggressive stance from the government against mortgage fraud.
“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,” said US Attorney Preet Bharara in a statement. “The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope.”
Fannie and Freddie buy mortgages from banks and package them into securities to sell to investors, but as The Associated Press noted the agencies don’t review loans before purchasing them. They rely instead on statements from the banks that they loans meet certain requirements.
The news that Bank of America is sued for $1 billion comes after the bank already paid a hefty penalty for fraud last year. Bank of America agreed to an $8.5 billion settlement for investors hurt by fraudulent mortgage securities.
