It’s been nearly a year since the U.S. government sued Bank of America over Countrywide’s sale of billions of dollars worth of toxic loans to Fannie Mae and Freddie Mac. Predictably, BofA has attempted to have the case dismissed, but a federal judge has given the green light for the suit to finally head to trial next month.

The lawsuit alleges that in the run up to the collapse of the housing market, Countrywide Financial, the failed mortgage lender bought by BofA in 2008, initiated a program dubbed the “High Speed Swim Lane,” better known as the “Hustle,” that removed most of the underwriting roadblocks that would have prevented unqualified applicants from receiving loans they could never feasibly pay back. The goal, claims the government, was for Countrywide to bundle up as many mortgages — regardless of quality — as possible and immediately resell them to Fannie and Freddie.

As the borrowers of these mortgages failed to repay their loans, Fannie and Freddie — both having been bailed out by U.S. taxpayers — saw substantial losses, to the tune of more than $1 billion.

The feds had originally sought triple damages under the False Claims Act, alleging that Countrywide made fraudulent claims for payment to government officials, but the judge threw out those charges in May while allowing the government’s suit under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) to continue.

Bank of America contends both that the Hustle was not the illegal free-for-all the government has made it out to be, and that it doesn’t really matter because all of those sales from Countrywide to Fannie and Freddie occurred before BofA snapped up Countrywide.

The judge denied BofA’s latest dismissal request, saying there are “genuine factual disputes” that should be decided at trial and thus “preclude a granting of summary judgment to any defendant.”

The trial is currently slated to start Sept. 23.

Government mortgage fraud lawsuit against BofA headed to trial [Reuters]

Judge Say U.S. Suit on Bank of America Mortgages Can Proceed [WSJ.com]

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