The government’s compliant has sought for damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Countrywide and later BofA, when it acquired the former in 2008, have been accused for engaging in a new loan origination process dubbed as "Hustle," from 2007 to 2009.
The loan program was intentionally designed to process loans faster without verifying quality, resulting in default of thousands of fraudulent and otherwise defective residential mortgage loans.
Manhattan US Attorney Preet Bharara said that the accused structured the loan process in its favor, while eliminating quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects.
After the mortgage bubble burst during 2006-2009, both Fannie and Freddie collapsed under the reeling pressure of millions of failing mortgages, and the government had to infuse $183bn into them to keep them running.
The Office’s Civil Frauds Unit has brought five other civil fraud lawsuits against major lenders for residential mortgage lending in connection with loans insured by the Federal Housing Administration, of which three have been settled to date.
