Government Hounds Bank of America Over Mortgage Lending
Bank of America (NYSE:BAC) squared off against the government on Tuesday morning for the first day of a trial that is expected to last as long as four weeks. Prosecutors, led by U.S. Attorney General for the Southern District of New York Preet Bharara, have accused the bank of “massive fraud” by selling bad mortgages to Freddie Mac and Freddie Mae during the build up to the financial crisis.
It’s important to clarify that while prosecutors have their cross hairs on Bank of America, this particular case has more to do with Countrywide Financial, once the country’s largest mortgage lender. Countrywide was purchased by Bank of America in 2008 as the housing market was collapsing, and the lender along with it.
In a complaint initially filed in October of 2012, the plaintiffs explained their case. “In 2007, as loan default rates rose across the country and the GSEs reevaluated their loan purchase requirements, Countrywide rolled out a new “streamlined” loan origination model it called the ‘Hustle.’” The ‘Hustle’ program — or, High Speed Swim Lane, “HSSL” — is at the heart of the case against the mortgage lender.