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Mortgage Fraud: U.S. Government Suing Bank of America for $1 Billion

This article was written by in Real Estate and Home. 3 comments.


I never liked the term “hustle” when used to discuss making money on the side. The word has the slight connotation of fraud or taking advantage of someone, and moving quickly to do so. Now, the word “hustle” is going to be linked to something more specific and decidedly negative. This was the name of the program Countrywide Financial and its acquirer Bank of America created for allegedly defrauding the government and taxpayers.

This is from the press release from the United States Attorney’s Office in the Southern District of New York:

Specifically, the Complaint alleges that from at least 2007 through 2009, COUNTRYWIDE, and later BANK OF AMERICA after acquiring COUNTRYWIDE in 2008, implemented a new loan origination process called the “Hustle,” which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae and Freddie Mac that later defaulted, causing over $1 billion dollars in losses and countless foreclosures.

Bank of AmericaThe name “Hustle” is derived from the program’s official title, “High-Speed Swim Lane,” whose acronym is HSSL. The name of the program is a description of how loans move quickly from application to approval to origination to sales, without the friction and resistance of risk analysis or quality control.

Countrywide and Bank of America, once the largest residential mortgage lender in the United States, sold loans to Freddie Mac and Fannie Mae, pseudo-government agencies designed to make purchasing a home more affordable and to boost the real estate market. The companies regularly purchase mortgages from companies like Countrywide, repackage the loans as investments, and sell them to major institutional investors for a profit. The agencies trust the companies like Countrywide to represent the true risk of the loans, but due to the way Countrywide and Bank of America were processing the loans, allegedly through this organized “Hustle” operation, the true risk was not identified.

In cases, where risk had been identified, Countrywide and Bank of America allegedly engaged in falsifying documents.

Bank of America’s response

Bank of America has not yet responded to these allegations. The company did, however, announce a $0.01 per share dividend this morning. I’ll update this article as more information becomes public.

This particular bank continues to attract a lot of ire. Over a thousand Consumerism Commentary readers have been discussing Bank of America’s various class-action lawsuits, specifically the overdraft fee settlement for which affected customers are still waiting for their piece of the settlement.

Justice Department

Published or updated October 24, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 3 comments… read them below or add one }

avatar Christian L.

Luke,
This is outrageous and not surprising. (Not to say I’m clairvoyant, but this type of action doesn’t surprise me coming from BofA. Maybe I’m biased because of how many times BofA took advantage of me, which is why I’m now with a credit union.)

I look forward to reading the updates, especially to find out how many homebuyers got stuck with one of these fast-tracked mortgages.

-Christian L. @ Smart Military Money

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avatar W at Off-Road Finance

No question this was illegal. But as with all crime, you have to look at both supply and demand. You can’t talk about drugs without talking about drug users, and you can’t talk about bad mortgages without talking about the government agencies that were all too eager to stamp them and turn them into AAA bonds. Fannie and Freddie got exactly what they wanted. If we don’t like housing busts, they should be abolished or privitized and allow them to be liquidated if they fail again.

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avatar TustinTim

Right on Off-Road. This was not just the “evil” bankers. It was corruption in the entire food chain.

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