Federal prosecutors are suing Bank of America (BOA) for more than $1 billion in a civil mortgage fraud lawsuit.
It was announced Wednesday and the government is accusing the bank of engineering a scheme that defrauded federally-backed mortgage buyers Fannie Mae and Freddie Mac during the national financial crisis in 2008-09.
The complaint filed in U.S. District Court in New York accuses the bank of using a loan-origination program called the "Hustle" to process mortgage applications at high speed with little checking for fraud, misstatements or other wrongdoing, according to USA Today.
Prosecutors allege the "Hustle" was in operation from at least 2007 through 2009, and BOA inherited it after its 2008 acquisition of Countrywide Financial and Countrywide Home Loans, the alleged originator of the scheme.
The "Hustle" did just that, hustled a lot of people with defective mortgage loans that defaulted after Bank of America sold them to Fannie and Freddie, causing more than $1 billion in losses and thousands of foreclosures, according to the 46-page complaint filed in Manhattan.
"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill," said Manhattan U.S. Attorney Preet Bharara, who co-announced the lawsuit.
Operating under the motto "Loans Move Forward, Never Backward," the documents allege mortgage executives tried to eliminate "toll gates" designed to ensure loans were sound and not tainted by fraud, according to a Reuters report.
This led to near 40 percent "defect rates" that were concealed from Fannie Mae and Freddie Mac. The document states executives even awarded bonuses to staff to "rebut" the problems being found.
Four years later, taxpayers like those living in the City of Hazelwood still have to deal with the fallout from all of the alleged fraud and scheming.
Have you fallen victim to a bad mortgage deal? How did you overcome it? Tell us more about it in the comments section.