"Legal minutiae may give Bank of America a basis to fight the claims in a recent Justice Department lawsuit.
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.
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.
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."