Bank of America Fined $1.27B for Mortgage Fraud A federal judge ordered Bank of America to pay $1.27 billion in penalties for fraud committed by its Countrywide Financial unit, which the government charged with selling shoddy mortgages to investors, Reuters reported July 30. Bank of America purchased Countrywide in July 2008, a move that has cost the bank billions of dollars in litigation costs, buyback demands and mortgage write-downs. In October 2013, a jury presided over by U.S. District Judge Jed Rakoff found the bank liable for Countrywide’s sale of defective loans to Fannie Mae and Freddie Mac. Additionally, former Countrywide executive Rebecca Mairone was found liable for her leading role in the loan sales and personally was fined $1 million, Reuters reported. The government’s case focused on Countrywide’s so-called “High Speed Swim Lane” or “Hustle” loan program that put mortgage applications on a fast-track approval that eliminated many check points that were in place to ensure loan quality. In his ruling on the case, Rakoff wrote, While the HSSL process lasted only nine months, it was from start to finish the vehicle for a brazen fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole,” Reuters reported. Rakoff said Fannie’s and Freddie’s payments for 17,611 suspected Hustle loans amounted to $2.96 billion. The reduced penalty against Bank of America, however, was the result of findings that showed not all loans had material defects, Reuters reported. Bank of America said it may appeal the federal judge’s decision. Mairone also indicated she may appeal. Her lawyer claimed she was a scapegoat. U.S. Attorney Preet Bharara in New York said this was the first case imposing civil penalties against a bank and bank executive under the Financial Institutions Reform, Recovery and Enforcement Act, Reuters reported.
Posted on: Mon, 11 Aug 2014 15:31:47 +0000
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