Federal prosecutors sued Bank of America for civil mortgage fraud for $1 billion in U.S. District Court in New York, today, reports Keven McCoy, of USA Today, in Feds sue Bank of America for 'Hustle' loan fraud. The suit alleges that Bank of America used a high-speed loan origination program called the "Hustle," gave incentives to employees for speedy processing, and failing to check for "fraud, mistatements, or other wrongdoing."
Federal prosecutors slapped Bank of America with a $1 billion-plus civil mortgage fraud lawsuit Wednesday, accusing the bank of engineering a scheme that defrauded federally-backed mortgage buyers Fannie Mae and Freddie Mac during the national financial crisis. ...
"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill," said Manhattan U.S. Attorney Preet Bharara, who announced the lawsuit with Steve Linick, inspector general of the Federal Housing Finance Agency (FHFA), and Christy Romero, special inspector general of the Troubled Asset Relief Program (TARP).
"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," said Bharara. "These toxic products were then sold to the government sponsored enterprises as good loans."
Bank of America has not yet commented on the allegations. But, at the very least, Bank executives should probably review whatever process led them to call a major internal employee incentive program, related to selling mortgages, "The Hustle."
I believe this may be the third such major civil lawsuit in recent months brought by Federal prosecutors trying to bring accountability to major banks and financial institutions for excesses related to the 2008 financial collapse. These are steps in the right direction of restoring the badly damaged confidence in our financial system.
2:50 PM PT: In related news, Rajat Gupta Sentenced To 2 Years In Prison For Insider Trading.
The former Goldman Sachs director was sentenced on Wednesday to two years in prison, followed by another year of parole, and ordered to pay a $5 million fine. He was convicted in June on insider-trading charges, following a trial that included testimony from Goldman CEO Lloyd Blankfein.
“With today’s sentence, Rajat Gupta now must face the grave consequences of his crime – a term of imprisonment," Manhattan U.S. Attorney Preet Bharara said in a statement. "His conduct has forever tarnished a once-sterling reputation that took years to cultivate.
"We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr. Gupta’s footsteps," Bharara added.