Bank of America Corp., the second-biggest U.S. lender by assets, sold defective residential mortgage loans to Fannie Mae and Freddie Mac that later defaulted, the U.S. government said in a $1 billion fraud lawsuit against the bank.

The U.S. Justice Department filed the complaint today in Manhattan federal court, claiming the bank and its Countrywide Financial unit generated thousands of defective mortgage loans and sold them to Fannie Mae and Freddie Mac.

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