U.S. District Attorney Preet Bharara just announced that he’s filed a complaint against Bank of America alleging that Countrywide, its mortgage unit, purposely defrauded Fannie Mae and Freddie Mac.
It all centres around something called “the Hustle,” or (HSSL- High Speed Swim Lane) a strategy started in August of 2007 the D.A.’s office says Countrywide implemented in order to speed up the mortgage origination process.
From the complaint:
The complaint goes on to allege that Countrywide was warned that this new process would result in loans of the poorest quality.
“Loans move forward, never backward,” became a Countrywide motto after the Hustle, the D.A. alleges, and executives removed “toll gates” that were supposed to slow down and force underwriters to review loan applications that were processed through Countrywides automated loan approval system, CLUES.
For example, one property in Miami was approved with the information that the mortgage holder made over $15,000 a month, when if fact they made just over $2,6000. The loan defaulted within 7 months of closing.
Then there’s the Alabama property where Countrywide allegedly failed to disclosed over $81,000 of debt held by the mortgage holder. to the GSEs.
Additionally, in order to boost the Hustle, Countrywide allegedly changed its compensation policy by giving out bonuses based on the quantity of loans originated, not on the quality of those loans.
At the same time, Countrywide told officials at Fannie and Freddie that they were tightening their review process to boost sales.
When the GSEs found fraud in the loans, the complaint alleges, Countrywide purposely thwarted the repurchase process resulting in over $1 billion in unrepurchased loans on the GSE’s books.
So yeah, if you were thinking about that cheery disco song when you heard “hustle”, you were thinking wrong.