Federal prosecutors slapped Bank of America

Federal prosecutors slapped Bank of America with a $1 billion-plus civil mortgage fraud lawsuit Wednesday, accusing the bank of engineering a scheme that defrauded federally-backed mortgage buyers Fannie Mae and Freddie Mac during the national financial crisis.

The complaint filed in U.S. District Court in New York accuses the bank of using a loan-origination program called the "Hustle" to process mortgage applications at high speed with little checking for fraud, misstatements or other wrongdoing.

Prosecutors charge the program, allegedly in operation from at least 2007 through 2009, was begun under Countrywide Financial and Countrywide Home Loans, and was continued by Bank of America when it bought Countrywide's operations in a controversial July 2008 acquisition.

The result, the suit alleges, was defective mortgage loans that defaulted after Bank of America sold them to Fannie and Freddie, causing more than $1 billion in losses and thousands of foreclosures, according to the 46-page complaint filed in Manhattan.

"Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill," said Manhattan U.S. Attorney Preet Bharara, who announced the lawsuit with Steve Linick, inspector general of the Federal Housing Finance Agency (FHFA), and Christy Romero, special inspector general of the Troubled Asset Relief Program (TARP).

"Countrywide and Bank of America systematically removed every check in favor of its own balance -– they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners and concealed the resulting defects," said Bharara. "These toxic products were then sold to the government sponsored enterprises as good loans."

Bank of America did not immediately respond to requests for comment on the lawsuit. The banks' share dropped after news of the lawsuit broke and finished the day down 5 cents to $9.31 Wednesday. Shares rose in after-hours trading.

Citing internal Countrywide documents, prosecutors said the aim of "Hustle" –- officially HSSL, or High Speed Swim Lane -– was to have loans "move forward, never backward," and to remove "toll gates" that could slow the loan process.