WASHINGTON, October 24 (RIA Novosti)
US federal prosecutors on Wednesday filed a $1 billion civil lawsuit against Bank of America, accusing America’s second largest bank of a “spectacularly brazen” scheme in which the bank allegedly churned out fraudulent mortgages and sold the loans to the government.
Manhattan federal prosecutor Preet Bharara said in a statement Wednesday that mortgage lender Countrywide Financial, which was later purchased by Bank of America, knowingly “made disastrously bad” mortgage loans to borrowers who could not afford them “and then stuck taxpayers with the bill” by selling them to government-controlled housing giants Fannie Mae and Freddie Mac.
It is the government’s first civil fraud lawsuit over mortgages sold to Fannie Mae and Freddie Mac.
“Countrywide and Bank of America systematically removed every check in favor of its own balance - they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects,” Bharara said. “These toxic products were then sold to the government-sponsored enterprises as good loans.”
The Countrywide program to generate these mortgages was known as the “High-Speed Swim Lane.” Within the company, the program was “aptly named ‘the Hustle,’” Bharara added.
The onset of the global financial crisis four years ago was precipitated by the creation of financial products based on so-called “subprime mortgages” - home loans to borrowers who could not afford them.
Numerous leading financial institutions reaped enormous profits generating and selling the financial products and were bailed out by the US government with hundreds of billions of taxpayer dollars when the market collapsed.
The US government has extracted civil penalties from several major financial players - including Goldman Sachs, Citigroup, and Wells Fargo - for fraudulent or deceptive behavior in connection with mortgage-related financial products.
But there have been no criminal prosecutions of senior executives at major banks in the United States for their roles in the mortgage crisis.
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