BoA Stock price

Long after the disco era, Bank of America Corp. (NYSE: BAC) was still singing "Do the Hustle."

So the federal government alleges.

U.S. regulators maintain BofA, the second biggest U.S. bank by assets, and its partner in crime, its Countrywide Financial Corp. unit, burdened taxpayers with hordes of losses by misrepresenting the quality of home loans they sold to Fannie Mae and Freddie Mac.

In federal court in Manhattan on Wednesday, the Justice Department slapped BofA with the suit, seeking damages of at least $1 billion claiming mortgage fraud.

Filed under the False Claims Act, the lawsuit also threatens to impose steep fines and could provide for three times the damages suffered by Fannie and Freddie, a penalty that could swell to more than $3 billion.

The complaint claims that in 2007, ailing Countrywide, saddled with revenue shortfalls as the subprime mortgage markets came tumbling down, did away with background checks on loan quality in a process streamlining effort dubbed "the Hustle," short for the acronym HSSL-High Speed Swim Lane. According to Countrywide documents, the program's mantra was "move forward, never backward."

Meanwhile, the bank gave surety to Fannie and Freddie that it was strengthening its underwriting guidelines.

The move by the U.S. government is seen as a means to help it foot the hefty costs linked to the 2008 bailout of Fannie and Freddie.