It’s good
news that federal prosecutors today filed a $1 billion-plus lawsuit against the Bank
of America Corp.
The lawsuit charges
that the bank engaged in a scheme to defraud Fannie Mae and Freddie Mac, government
controlled companies that resell mortgages.
The lawsuit
alleges that from at least 2007 through 2009, Countrywide Financial and
Countrywide Home Loans, and later Bank of America after acquiring Countrywide
in 2008, carried out a new loan process called the High Speed Swim Lane or
“Hustle.”
The Hustle
was intentionally designed to process loans at high speed and without quality
checkpoints, the lawsuit said. The purpose was to generate thousands of
fraudulent and defective residential mortgage loans sold to Fannie Mae and
Freddie Mac that later defaulted, causing more than $1 billion dollars in
losses and thousands of foreclosures.
This is the
first civil fraud suit brought by the Department of Justice on mortgage loans
sold to Fannie Mae and Freddie Mac.
“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,” Manhattan U.S. Attorney Preet Bharara said in a statement.
Steve A.
Linick, inspector general of the Federal Housing Finance Agency, which oversees
Fannie Mae and Freddie Mac, said Countrywide and Bank of America allegedly
engaged in fraudulent behavior that contributed to the financial crisis, which
ultimately fell on the shoulders of taxpayers.
Bharara said the
lawsuit is aimed at recouping some of the money taxpayers paid to bail out the
financially troubled Fannie Mae and Freddie Mac.
I applaud this action. For years, I’ve wanted to see those
who caused the financial crisis brought to justice for their reprehensible
conduct.
