Bank of America Sued for $1 Billion: Accused of Selling Defective Mortgage Loans

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(Photo:REUTERS/Fred Prouser)An ATM machine at a Bank of America office is pictured in Burbank, California August 19, 2011.

Bank of America is being sued for $1 billion according to new reports. The Bank of America Corp. (BAC) allegedly sold defective residential mortgage loans to Fannie Mae and Freddie Mac that later defaulted.

In response to the allegations the United States government has opened up a $1 billion fraud lawsuit against the bank.

The U.S. Justice Department reportedly filed a civil lawsuit against BAC on Wednesday in Manhattan federal court.

The Justice Department has claimed that Countrywide Financial and its parent Bank of America generated and sold Fannie Mae and Freddie Mac thousands of defective mortgage loans.

Countrywide was acquired by Bank of America in 2008.

U.S. Attorney Preet Bharara made a statement in Manhattan on Wednesday announcing the lawsuit, saying that the suit would be the first ever by the Justice Department to bring allegations of fraud over mortgage loans sold to the two entities.

He said, "The fraudulent conduct alleged in today's complaint was spectacularly brazen. Through a program aptly named 'the Hustle,' Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill."

Bank of America is accused of having "systematically removed every check" in the issuance of mortgages. Following that the bank allegedly sold the "flawed mortgages" to the government, according to the lawsuit filing.

The case is listed as U.S. v. Bank of America Corp. (BAC)

Meanwhile it has been reported that "Obama for America" took out a $15 million loan from Bank of America in September, according to the campaign's October monthly FEC report.

The loan was reportedly put in place on Sept. 4 and is due just over two months later on Nov. 14, which is eight days following the presidential election. Obama for America received an interest rate of 2.5 percent plus the current Libor rate, according to the Daily Caller.