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U.S. sues Bank of America over "Hustle" mortgage fraud

ryzvonusef (1151717) writes | about 2 years ago

United States 0

ryzvonusef (1151717) writes "The United States filed a fraud lawsuit against Bank of America Corp, accusing it of causing taxpayers more than $1 billion of losses by selling thousands of toxic mortgage loans to Fannie Mae and Freddie Mac.

Wednesday's case, originally brought by a whistleblower, is the U.S. Department of Justice's first civil fraud lawsuit over mortgage loans sold to the big mortgage financiers, bailed out in 2008.

According to a complaint filed in Manhattan federal court, Countrywide in 2007 invented and Bank of America continued a scheme known as the "Hustle" to speed up processing of residential home loans.

The program, also known as HSSL for "High Speed Swim Lane," operated under the motto "Loans Move Forward, Never Backward," and tried to eliminate "toll gates" designed to ensure that loans were sound and not tainted by fraud, the government said.

The program removed underwriters from all but the riskiest loans and replaced them with loan specialists, previously considered unqualified even to answer borrower questions.

This led to "defect rates" approaching 40 percent, roughly nine times the industry norm, but Countrywide concealed this from Fannie Mae and Freddie Mac, and even awarded bonuses to staff to "rebut" the problems being found, the government added."

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