The U.S. Department of Justice has filed a civil lawsuit against Bank of America Corp. for $1 billion in damages for mortgage fraud, the top federal prosecutor in Manhattan announced Oct. 24.
The lawsuit, filed in the Federal District Court in Manhattan, New York, alleges that Countrywide Inc., and later Bank of America, originated mortgages without proper due diligence. Such mortgages were often rushed, and were sold off to federal mortgage finance companies such as Fannie Mae and Freddie Mac, before and during the subprime loan crisis.
These loans defaulted, forcing Fannie and Freddie to take billions in losses. The two mortgage finance giants
—which guarantee trillions in mortgages—were forced to take massive federal bailouts, eventually being put into federal conservatorship in 2008.
