Bank of America Sued for Mortgage Fraud

By Marcos Gonzalez

It has been five years since the housing market crumbled, and government officials are still trying to find who to blame for the mortgage collapse.

On Wednesday the focus shifted toward Bank of America. They accused the bank and Countrywide financial of creating a plant to defraud government backed mortgage agencies by giving loans to people without following through with proper regulations.

Prosecutors seek $1 billion in penalties from the bank to compensate for the behavior that forced taxpayers to get millions of dollars in bad loans.

“This lawsuit should send another clear message that reckless lending practices will not be tolerated,” said prosecutor Preet Bharara.

The public is upset with the small number of criminal action that has been filed since the financial crisis. Few of the cases have been against officials. No Bank of America officials were sued as part of the lawsuit.

The legal problems for Bank of America have cost the bank billions of dollars in settlements. Many of its problems have come after taking control of Countrywide Financial, one of the largest mortgage lenders in the U.S.

On Wednesday, the Justice Department mentioned a home loan program known as the “hustle,” which the bank adopted from Countrywide in 2008, and continued through 2009.

Countrywide’s “hustle,” approved loans to borrowers that did not fill the criteria and passed them on to companies such as Fannie Mae and Freddie Mac, the two government-controlled companies guaranteed these loans causing a large number of foreclosures.

“The bank 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,” said Lawrence Grayson, spokesman for Bank of America. “Bank of America can’t be expected to compensate every entity that claims losses that actually were caused by the economic downturn.”

Image Courtesy: AP Images