According to the Associated Press, the United States Department of Justice (DOJ) is seeking $1 billion from Bank of America in a lawsuit over allegations of mortgage fraud.
The DOJ alleges that Bank of America sold defective mortgages to customers in a program known within the bank as “the Hustle”. The mortgages were then reportedly purchased by bailed-out financial firms Fannie Mae and Freddie Mac, which resulted in over $1 billion in losses for taxpayers, according to the U.S. Attorney for the Southern District of New York.
The DOJ told the media that “the Hustle” was a nickname for Bank of America’s “High-Speed Swim Lane”, which was suppose to “streamline the mortgage origination process”, according to the AP. However, the DOJ reports that the program was “intentionally designed to process loans at high speed and without quality checkpoints, and generated thousands of fraudulent and otherwise defective residential mortgage loans.”
“For the sixth time in less than 18 months, this office has been compelled to sue a major U.S. bank for reckless mortgage practices in the lead-up to the financial crisis,” said U.S. Attorney Preet Bharara in a statement to the AP. “The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope.”
“[Bank of America] 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. This lawsuit should send another clear message that reckless lending practices will not be tolerated.”
It is alarming that Bank of America would allegedly violate its costumers’ trust by selling them toxic mortgages. People with bad mortgages should be aware that Chapter 13 or Chapter 7 bankruptcies stop the foreclosure process. A bankruptcy filing generates an automatic stay that prevents creditors from taking action against you to collect debts. This process can take several months and give you the time you need to renegotiate the terms of your mortgage with your lender.
Post bankruptcy life can be less stressful for those who are facing foreclosure. If your financial situation is a problem, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.