The federal government has filed a $1 billion civil lawsuit against Bank of America and its subsidiaries, claiming the company intended to remove specific quality controls with regard to loan origination – which played a huge part in the meltdown of the housing market.
Miami foreclosure attorneys know it’s no secret that lenders and banks were central to the creation and subsequent implosion of the housing bubble. What the filing in U.S. v. Bank of America, U.S. District Court, Southern District of New York, shows is some insight into just how elaborate and planned these schemes were.
Specifically, federal prosecutors are targeting the actions and processes of subsidiary Countrywide. Acting as a mortgage lender, the suit says the company put in place a loan orgination process that company insiders called “The Hustle.” According to the government, it started in 2007. The primary – and deliberate – goal was to remove the quality controls, or checks and balances, that stood in the way of the company churning out as many mortgages as possible. In order to accomplish this, Countrywide launched a program called Full Spectrum Lending.
The problem with this, of course as we now know, is that this process meant people who could never have actually afforded these loans were approved. But it wasn’t just the average Joe the banks were scamming. The government had been there to ensure those loans, as they had done for decades following the Great Depression. The government contends it was not aware that the loans, which had been approved according to what were supposed to be stringent measures, were actually high-risk liabilities. When the bottom fell out of the market, the federal housing agency was stuck holding a large portion of that tab.
Although the specific “hustle” scheme was started by Countrywide, which was independent in 2007, the Department of Justice claims that Bank of America, which acquired the company in 2009, continued the process, despite warnings by one top executive that it wouldn’t end well.
In fact, the former executive vice president of Countrywide, also a senior manager of the Countrywide division that kickstarted the “hustle” program, blew the whistle on the practice, saying he had pleaded with his fellow executives to drop the program. In fact, he was actually party to the original qui tam complaint (which means he filed it against his former employer, in conjunction with the government, and will now be in line for millions as a whistleblower).
At one time, Countrywide was the largest mortgage lender in the country, cranking out some $490 billion in mortgage loans in 2005. Subprime loans specifically were originated out of its Full Spectrum Lending division. The “hustle” was a number of steps taken to reduce processing time as well as underwriting oversight of conventional loans. They called these controls “toll gates,” viewed as obstacles to overcome. To help overcome this, the company eliminated checklists that had previously been mandatory and did away with all of its compliance specialists, who previously had been the ones who conducted quality control on each individual loan to make sure it met the proper criteria.
All of this begins to paint a picture of a very deliberate plot to defraud both taxpayers and consumers.
The government alleges the company specifically has violated the recently revamped federal False Claims Act.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Williams & Connolly, Goodwin Procter on defense in $1 billion BofA mortgage fraud case, Oct. 24, 2012, By David Bario, The Litigation Daily
U.S. v. Bank of America, filed Oct. 24, 2012, U.S. District Court, Southern District of New York
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