U.S. sues BoA for dodgy mortgages
The US sued Bank of America Wednesday for more than $1 billion for allegedly having sold dodgy mortgages to state-controlled mortgage financers Fannie Mae and Freddie Mac.
The government charged that Country-wide — the mortgage giant now owned by Bank of America — labelled defective mortgages as good-quality and sold them to the two companies, causing “over $1 billion dollars in losses and countless foreclosures.”
The suit says that between 2007 and 2009 Countrywide ran a mortgage origination program called “Hustle” which aimed to quickly process thousands of new mortgages without quality controls and then sell them to Fannie and Freddie. “The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Preet Bahara, the US attorney in New York City, said in a statement.
“Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill,” he said.
“This lawsuit should send another clear message that reckless lending practices will not be tolerated.”
Countrywide was, at the height of the US housing boom in the 2000s, the largest mortgage origination company in the United States, and resold most of its mortgages to Fannie and Freddie.
When the housing bubble burst, both Fannie and Freddie nearly collapsed.
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