U.S. Sues Bank of America over Mortgages

$1 bln lawsuit charges bank sold defective residential mortgage loans to Fannie and Freddie.

Bank of America Corp. sold defective residential mortgage loans to Fannie Mae and Freddie Mac that later defaulted, the U.S. government said in a $1 billion lawsuit against the bank.

The U.S. Justice Department filed a civil lawsuit today in Manhattan federal court, claiming that Countrywide Financial and its parent Bank of America generated and sold Fannie Mae and Freddie Mac thousands of defective mortgage loans. Bank of America acquired Countrywide in 2008.

The lawsuit is the first by the Justice Department to allege fraud over mortgage loans sold to the two entities, U.S. Attorney Preet Bharara in Manhattan said today in a statement announcing the suit, which covers conduct from 2007 to 2009.

“The fraudulent conduct alleged in today’s complaint was spectacularly brazen,” Bharara said. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.”

The government claims in the complaint that Bank of America “systematically removed every check” in the issuance of mortgages and then sold the “flawed” mortgages to the government.

The case is U.S. v. Bank of America Corp., U.S. District Court, Southern District of New York (Manhattan).

 

Bloomberg News

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