NEW YORK, Oct. 31, 2012 -- /PRNewswire-iReach/ -- Think the fallout from the housing bubble's burst is over? Think again.
Federal prosecutors in New York have just filed suit against Bank of America, claiming that its "brazen" mortgage fraud led to the housing industry's collapse and made the problems worse after the recession officially began. What exactly is Bank of America accused of? The allegations stem from a company that Bank of America bought out in 2008 called Countrywide Financial Corporation – and this isn't the first time Bank of America has been in hot water over Countrywide.
Today, Bank of America is being sued for issues related to Countrywide. Specifically, Countrywide is accused of defrauding the government-backed mortgage agencies by giving out loans without having the proper controls in place. In layman's terms, it means Countrywide is accused of giving out home loans recklessly, without checking to see if it was going to people who deserved it or not – and doing so knowing that taxpayer money would be there to pay the bills if things went wrong. How were they able to get away with this, especially since there have been so many new regulations put into place ever since the housing bubble burst?
According to federal prosecutors, it was all part of a scheme called "The Hustle". Countrywide allegedly came up with the scheme. Then, when Bank of America took over in 2008, they kept the scheme going for at least a year.