Government of America sues Bank of America for $1 BillionSubmitted by P.Au.L on Wed, 10/24/2012 - 14:24
NEW YORK (MarketWatch) — The federal government filed a civil lawsuit against Bank of America Corp., alleging the second-biggest U.S. bank by assets saddled taxpayers with losses by misrepresenting the quality of home loans it sold to mortgage-finance firms Fannie Mae and Freddie Mac.
The action, filed Wednesday in federal court in Manhattan, seeks at least $1 billion in damages. The filing represents a novel effort by the government to defray costs tied to the 2008 bailout of Fannie and Freddie, and potentially opens a new front against a banking industry already dealing with hefty legal costs.
The government alleges Countrywide Financial Corp., the mortgage company Bank of America (NYSE:BAC) acquired in 2008, dismembered checks on loan quality in 2007 through 2009, adopting a process called “the Hustle” that aimed to boost the speed at which it originated and sold loans to the companies. The mortgage unit falsely continued to claim the loans qualified for insurance from Fannie Mae (OBB:FNMA) and Freddie Mac (OBB:FMCC) , the complaint alleges.