The Justice Department has added a former executive at Countrywide to a lawsuit that accuses Bank of America (BAC) of causing billions of dollars of losses to Fannie Mae and Freddie Mac.

Rebecca Mairone, who served as chief operating officer of a lending division at Countrywide that adopted allegedly defective lending procedures, is named in court papers filed recently in U.S. District Court in Manhattan by U.S. Attorney Preet Bharara.

The filing, which was first reported by the Huffington Post, charges that Mairone, who is currently a managing director at JPMorgan Chase (JPM), supervised Countrywide's adoption of a process for originating mortgages the company dubbed the "Hustle," which aimed to cut processing times on loan applications by as much as 50 days and adhered to the motto, "Loans Move Forward, Never Backward."

To achieve its goal, Countrywide, which Bank of America took over in 2008, allegedly eliminated safeguards put in place to promote quality and prevent fraud in connection with the loans, which Fannie and Freddie bought from the companies over roughly 18 months starting in January 2008.

Countrywide executives, "and in particular Mairone, rolled out [the Hustle] and visited the selected processing centers…that were to implement [the Hustle] in order to promote it," Bharara charged in his filing. "The [Hustle] centers in fact maintained no on-site underwriting manager and the loan specialists reported to operations managers and, ultimately, to Mairone."

Marc Mukasey, a lawyer for Mairone, said in an email that the case lacks merit and that "it's too bad that a great office like the U.S. Attorney's Office for the Southern District has chosen to attack a woman who has always been a champion of ethics and fairness."

"Rebecca did nothing wrong and will be vindicated at trial," Mukasey added.

According to the lawsuit, Countrywide, which in 2007 was the top seller of single-family home loans to Fannie, knew the Hustle contravened Fannie's and Freddie's standards for quality and would have caused the entities to reject the loans had they known the process underwriters followed.

Loans that Fannie bought from Countrywide went into default or foreclosure at a rate of 21%, which was two to three times the rate of major sellers in the industry generally, Bharara charged.

Mairone continued to supervise efforts to do away with checks to make sure borrowers had the ability to repay loans, and to funnel the loans to Fannie and Freddie, after being advised the meltdown in the subprime mortgage market demanded that underwriters use care, the suit says.

The government's contentions cover conduct that allegedly continued after B of A took over Countrywide in 2008 and extended into 2009.

Though B of A agreed in January to pay Fannie billions of dollars to settle mortgage claims, the settlement "cannot repair the damage" to Fannie, Freddie or the government as a result of the bank's sale of defective loans, Bharara charged.

In December, B of A asked the court to dismiss the lawsuit because Fannie and Freddie allegedly do not qualify as federally insured financial institutions under the law the Bharara chose to bring the case. The court has yet to rule on the request.

"Bank of America asked that the court dismiss the U.S. Attorney's complaint for lack of merit, so they've revised their legal theories," B of A spokesman Lawrence Grayson said in an email. "We believe they're equally unfounded and that neither Bank of America nor Countrywide defrauded Fannie Mae or Freddie Mac."

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