DOJ Files Bank Of America Mortgage Fraud Suit

The federal government has been cracking down lately against mortgage fraud in the housing finance market, slapping massive firms with large suits. A recently-filed B of A mortgage fraud suit seeks $1 billion in problems for toxic loans sold to Freddie Mac and Fannie Mae.

Getting Countrywide a consequence

Countrywide is a mortgage lender that B of A bought when it went under during the recession. It is one of the mortgage companies that were known for making a lot of financial blunders. Bank of America has been dealing with a ton of lawsuits because of the things the company did.

Another such suit has just been filed by the United States Attorney of Manhattan, according to the New York Times, claiming mortgage fraud in numerous loans that Countrywide sold to federally owned but privately-run mortgage insurance houses Freddie Mac and Fannie Mae. The B of A mortgage fraud suit seeks $1 billion in problems.

A quick track program

The Bank of America mortgage fraud lawsuit states that before and after Countrywide had been acquired and absorbed to the company, a program known as "High Speed Swim Lane," according to the Washington Post, or "HSSL" or "hustle" was in place that essentially put mortgage loans on the fast track to federal backing without properly vetting the mortgages.

USA Today explained that the program lasted from 2007 to 2009, according to USA Today, which suggests that it stayed in place after Bank of America took on the company. The idea is that the program would skip verification of the borrower's income and would falsify information to be able to give workers bonuses for getting mortgages.

There was a borrower that defaulted within a year when $81,000 in debt was not disclosed on the loan documents. Another borrower was only making $2,666 per month but had written on the loan application $15,500 per month. That person defaulted in seven months. It is the bank's job to make sure all the information is right because that is not Fannie and Freddie's job.

'Simply false'

The Justice Department hopes to get $1 billion in losses from the program from B of A since it believes that mortgage loans under the program should have been repurchased but B of A did not do that. Freddie and Fannie are under government control right now, which is why they have the right to sue.

According to USA Today, a 2008 study showed that 57 percent of homeowners in the program defaulted, and there were a lot in the program. The bank claims all allegations are false while people are no longer in the homes they bought.

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