Mortgage Fraud: U.S. Government Suing Bank of America for $1 Billion
This is from the press release from the United States Attorney’s Office in the Southern District of New York:
Specifically, the Complaint alleges that from at least 2007 through 2009, COUNTRYWIDE, and later BANK OF AMERICA after acquiring COUNTRYWIDE in 2008, implemented a new loan origination process called the “Hustle,” which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae and Freddie Mac that later defaulted, causing over $1 billion dollars in losses and countless foreclosures.The name “Hustle” is derived from the program’s official title, “High-Speed Swim Lane,” whose acronym is HSSL. The name of the program is a description of how loans move quickly from application to approval to origination to sales, without the friction and resistance of risk analysis or quality control.
Countrywide and Bank of America, once the largest residential mortgage lender in the United States, sold loans to Freddie Mac and Fannie Mae, pseudo-government agencies designed to make purchasing a home more affordable and to boost the real estate market. The companies regularly purchase mortgages from companies like Countrywide, repackage the loans as investments, and sell them to major institutional investors for a profit. The agencies trust the companies like Countrywide to represent the true risk of the loans, but due to the way Countrywide and Bank of America were processing the loans, allegedly through this organized “Hustle” operation, the true risk was not identified.
In cases, where risk had been identified, Countrywide and Bank of America allegedly engaged in falsifying documents.
Bank of America’s responseBank of America has not yet responded to these allegations. The company did, however, announce a $0.01 per share dividend this morning. I’ll update this article as more information becomes public.
This particular bank continues to attract a lot of ire. Over a thousand Consumerism Commentary readers have been discussing Bank of America’s various class-action lawsuits, specifically the overdraft fee settlement for which affected customers are still waiting for their piece of the settlement.