The Whistleblower, The “Hustle” and The Bank…of America

On October 24, 2012, the Department of Justice brought a civil fraud suit against Bank of America directly (as of July 1, 2008) (and as a successor as they acquired Countrywide Financial and Countrywide Home Loans) for allegedly selling toxic mortgages from 2007 to 2009 and causing US taxpayers more than a billion dollars in losses.

 The Whistleblower was a former Countrywide Senior and then Executive Vice President from 2003-2009, and the Hustle was a process allegedly designed to speed up loans with fraudulent and unverified information, overseen by inexperience loan processors as compliance specialists and underwriters were mainly eliminated from the process, so the mortgages could be sold by BofA/Countrywide “with the knowing misrepresentation that they were investment-quality loans that complied with GSE requirements” to government-sponsored enterprises—Fannie Mae and Freddie Mac. (Complaint at paragraph 6.) These federally-backed mortgage buyers would then repackage the loans to be sold as securities to investors. 

The complaint alleges in paragraph 7 that “Countrywide’s own quality control reports identified material defect rates [in Hustle loans] of nearly 40% in certain months, rates that were nearly   Instead of taking action to correct these problems, the complaint alleges that rewards were given to rebut these defects and quality control problems.  (Complaint at paragraph 87.)

In 2008-2009, taxpayers were bailing out BofA with $45 billion in taxpayer money through the TARP (Troubled Asset Relief Program).  BofA paid the money back at the end of 2009.  The lawsuit seeks treble damages under the False Claims Act and civil penalties under FIRREA (Financial Institutions Reform, Recovery and Enforcement Act).

Read more here at 4closure Fraud, which has posted a copy of the federal complaint: