The Department of Justice has filed a federal lawsuit against the Bank of America for cutting corners on checking on the quality of mortgage loans which it later sold to the mortgage finance firms Fannie Mae and Freddie Mac.
The complaint says that Countrywide, since purchased by Bank of America, reduced the amount of time spent processing and underwriting conventional loans to increase loan volume and revenue.
If successful, the case is expected to become a template for Uncle Sam’s pursuit of those banks and individuals who were behind the mortgage backed loan scandals in which shortcuts were taken to increase earnings despite knowledge of the problems that would ensue.
In February 2012, the Bank Of America paid $1 billion in a settlement relating to allegations tied to Federal Housing Administration backed loans. Three other banks have agreed to pay more than $490 million in similar cases.