(Reuters) – Bank of America Corp heads to trial this week over allegations its Countrywide unit approved deficient home loans in a process called “Hustle,” defrauding Fannie Mae and Freddie Mac, the U.S. government enterprises that underwrite mortgages.
In what would be the government’s first financial crisis case to go to trial against a major bank over defective mortgages, jury selection is set to begin in federal court in New York on Tuesday, barring a last-minute settlement.
The trial is also a reminder of the billions of dollars in legal liabilities Bank of America has incurred as a result of its 2008 acquisition of Countrywide Financial Corp, which became a poster child of the mortgage meltdown.
The U.S. Justice Department filed the civil lawsuit in 2012, blaming the bank for more than $1 billion in losses to Fannie Mae and Freddie Mac, which bought mortgages that later defaulted. Since then, new evidence and pre-trial rulings by U.S. District Judge Jed Rakoff have pared the case back.