BANK of America will this week face claims Countrywide, which it owns, defrauded government mortgage underwriters from 2007.
It is alleged Countrywide approved deficient home loans in a process called “Hustle”, before selling those loans on to Fannie Mae and Freddie Mac.
When the loans defaulted, those state-backed entities lost more than $1bn (£623m), with the US Justice Department blaming the lender for the losses in a 2012 court filing.
Bank of America has suffered from a series of legal rows over the activities of Countrywide, which it acquired in 2008.
The government lawsuit stems from a whistleblower case brought by former Countrywide executive Edward O’Donnell.
The lawsuit claims Countrywide eliminated credit checks and began to pay staff solely on the volume of the loans they produced.
The Justice Department claims this was despite Countrywide telling Fannie Mae and Freddie Mac it had tightened lending standards.
City A.M. Reporter