Bank of America is being sued by the federal government for mortgage fraud.
According to Reuters, the Department of Justice filed a lawsuit in a Manhattan federal district court against Bank of America, citing that the bank sold toxic home loans to Fannie Mae and Freddie Mac.
This time, the mortgage fraud case isn't criminal. It's civil. Which makes it ripe for a personal injury discussion.
It's reportedly the first such suit brought by the DOJ in the mortgage crisis. The government is suing the bank for damages. The government's complaint seeks damages of over $1 billion under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
The lawsuit involves a scheme called "Hustle," said the DOJ in a press release. This scheme was used to hustle the mortgage applications through the system. This made loan application processing much speedier, but removed some important checkpoints. As a result, many troubled borrowers were issued loans.
These problem loans, or "toxic loans" became the focal point of the economic downturn.
Mortgage lenders and brokers were given incentives to ignore these issues and give out loans, urging them to speed the loan applications, reports The Associated Press.
When the mortgages began defaulting, then the housing market came crashing down.
And that was just the beginning.
The mortgages were tied to fancy Wall Street products. With the mortgages crashing, Wall Street soon came crashing down as well.
So you can see now, how the billion dollar damages came from something as simple as a scheme to hustle loan applications through.
This isn't a class action so it's hard to say what the affected borrowers stand to gain by the lawsuit. But if the government wins, Bank of America will have to pay billions back to the U.S. government.
Have a look at the lawsuit here.
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