"For the sixth time in less than 18 months, this office has been compelled to sue a major U.S. bank for reckless mortgage practices in the lead-up to the financial crisis," Bharara said when announcing the litigation. "The fraudulent conduct alleged in today's complaint was spectacularly brazen in scope.

"As alleged, through a program aptly named 'the Hustle,' Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill. As described, Countrywide and Bank of America systematically removed every check in favor of its own balance – they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects," Bharara said.

"These toxic products were then sold to the government-sponsored enterprises as good loans. This lawsuit should send another clear message that reckless lending practices will not be tolerated," he said.

FHFA Inspector General Steve Linick added, "To prevent fraud, conducting quality reviews and complying with underwriting standards are critical. Countrywide and Bank of America allegedly engaged in fraudulent behavior that contributed to the financial crisis, which ultimately falls on the shoulders of taxpayers. This type of conduct is reprehensible and we are proud to work with our law enforcement partners to hold all parties accountable." According to the government ,Countrywide initiated the Hustle (or "HSSL," for "High-Speed Swim Lane") in 2007 through its Full Spectrum Lending Division, just as loan default rates were increasing throughout the country and the GSEs were tightening their loan purchasing requirements to reduce risk.

Prosecutors said that according to internal company documents, the goals of the Hustle were high speed and high volume, where loans "move forward, never backward" in the origination process.

To accomplish these goals, the Hustle removed necessary quality control "toll gates" that could slow down the origination process. For example, the Hustle eliminated underwriters from loan production, even for many high-risk loans, such as stated income loans.

Instead, the Hustle relied almost exclusively on unqualified and inexperienced clerks, called loan processors. Although loan processors had not been previously considered competent or knowledgeable enough to be permitted even to answer borrower questions, they were now required to perform critical underwriting duties.

If a loan processor entered data from a loan file into an automated underwriting system called CLUES and received a rating that the loan had an acceptable risk of default (or "Accept" rating), no underwriter would ever see the loan, the government said.

The Hustle also did away with compliance specialists, whose job it was to ensure that any loans that were approved with conditions had the conditions satisfied before closing, the government alleges.

Although loan processors were at the time entrusted with much more responsibility, they were given much less guidance. For example, mandatory checklists for performing important underwriting tasks (such as evaluating an appraisal or assessing the reasonableness of stated income) were eliminated.

Loan processors were also financially incentivized to put volume ahead of quality, as Full Spectrum Lending changed its compensation plan to provide bonuses based solely on loan volume. Reductions to compensation for poor loan quality were discontinued, the government added.

The Charlotte, N.C.-based Bank of America has not yet issued a statement on the litigation.