Monday, October 29, 2012

"the hustle"

"Legal minutiae may give Bank of America a basis to fight the claims in a recent Justice Department lawsuit.
The Justice Department filed a lawsuit last week seeking at least $1 billion in penalties against Bank of America for troubled loans sold to the mortgage finance giants Fannie Mae and Freddie Mac. The government complaint focuses on a program to push out mortgages implemented by Countrywide Financial, which Bank of America acquired in July 2008.

The program, referred to as the “High-Speed Swim Lane” or “the hustle,” was created to get mortgages approved by dropping a number of credit quality protections to speed up the approval process. The program began in 2007 after the subprime mortgage market collapsed, and Countrywide tried to prop up its loan volume by concentrating on higher-quality mortgages that met the underwriting requirements of Fannie and Freddie.

According to the complaint, Countrywide did not disclose that “the hustle” eliminated many checks on the quality of the borrowers when it sold the loans to Fannie and Freddie. The Justice Department accuses Bank of America of continuing the program after it acquired Countrywide and claims that the bank has improperly fought taking back defaulted loans that should not have been sold to Fannie and Freddie."

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