U.S. Government Hits Bank Of America With $1 Billion Lawsuit Over Lending Program

NEW YORK - (Mealey's) The U.S. government on Oct. 24 filed a $1 billion lawsuit against Bank of America Corp., as successor for Countrywide Financial Corp., alleging that Countrywide violated provisions of the False Claims Act by engaging in a scheme to defraud Fannie Mae and Freddie Mac in connection with Countrywide's residential mortgage lending business (United States of America v. Bank of America Corp., et al., No. 12-1422, S.D. N.Y.). 

The complaint was filed by U.S. Attorney for the Southern District of New York Preet Bharara in the U.S. District Court for the Southern District of New York and names Bank of America and Bank of America N.A. (collectively, Bank of America), as successor to Countrywide Financial Corp. and Countrywide Home Loans (collectively, Countrywide), as defendants. 

The government alleges that Countrywide engaged in a scheme to defraud Fannie Mae and Freddie Mac by "rolling out a new 'streamlined' loan origination model call the 'Hustle,'" in which it "eliminated every significant checkpoint on loan quality and compensated its employees solely based on the volume of loans originated, leading to rampant instances of fraud and other serious loan defects, all while Countrywide was informing [Fannie Mae and Freddie Mac] that it had tightened its underwriting guidelines." 

Unreimbursed Losses 

"When the loans predictably defaulted, [Fannie Mae and Freddie Mac] incurred more than one billion dollars in unreimbursed losses," the government says. 

The government seeks to recover treble damages and penalties under the False Claims Act and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act.

 The government is represented by Bharara and Assistant U.S. Attorneys for the Southern District of New York Pierre G. Armand and Jaimie L. Nawaday in New York.

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