The U.S. government sued Bank of America, the second-biggest lender by assets in the country, for more than $1 billion over mortgage fraud against Fannie Mae and Freddie Mac during the years of financial crisis.
The U.S. Justice Department filed the lawsuit in Manhattan federal court and accused the bank of generating thousands of defective loans which were sold to the two home-mortgage finance companies now under government control.
"The fraudulent conduct alleged in yesterday's complaint was spectacularly brazen," U.S. Attorney Preet Bharara in Manhattan said in a statement announcing the suit. "Through a program aptly named 'the Hustle,' Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill."
Bank of America acquired Countrywide in 2008 and the loans guaranteed by Fannie Mae and Freddie Mac cost taxpayers more than $1 billion as they defaulted.
"These toxic products were then sold to the government sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated," he said.
"Bank of America has stepped up and acted responsibly to resolve legacy mortgage matters. The claim that we have failed to repurchase loans from Fannie Mae is simply false," the bank responded to the allegations in a statement. "At some point, Bank of America can't be expected to compensate every entity that claims losses that actually were caused by the economic downturn."
