Bank of America Loses Mortgage Fraud Trial
Nov. 10, 2013
Another banking giant has been found guilty of fraud in its mortgage dealings that helped lead to the financial crisis in this country.
Last month, according to Reuters, after a month-long trial, a New York jury found Bank of America liable on one civil fraud charge over defective mortgages sold by the bank’s Countrywide unit. According to the lawsuit which stemmed from a case brought by former Countrywide executive Edward O’Donnell, Countrywide originated “shoddy home loans in a process called ‘hustle’ and then sold them to Fannie Mae and Freddie Mac, the federal government’s mortgage giants.
Government lawyers say that Countrywide began the “High Speed Swim Lane” or “Hustle” program in 2007, a program that eliminated loan-quality checkpoints and also paid employees based on loan volume and speed, which thus led to fraud and other defects in the loans. According to government investigators in the case, approximately 43 percent of the loans created by Countrywide were defective.
The New York federal jury also found former Countrywide executive Rebecca Mairone liable on one charge of fraud as well.
Although the Justice Department has stated it plans to seek nearly $848 million in penalties, it will be up to the U.S. District Judge overseeing the case to decide the amount of penalties Bank of America will be assessed.
Bank of America spokesman Lawrence Grayson stated that Bank of America purchased Countrywide in July of 2008, months after the “Hassle” program had ended. He said because Bank of America’s purchase happened after the alleged fraud was committed, Bank of America “will evaluate our options for appeal.”
This lawsuit against Bank of America was the first financial crisis-related case against a bank by the Justice Department to go to trial under the Financial Institutions Reform, Recovery, and Enforcement Act, an act that was passed after the savings and loan scandals of the 1980’s.
The Justice Department is continuing their investigation into banks for fraud and other defective practices that helped to lead to the financial crisis in this country. The department has been criticized in the past for not holding banks, mortgage companies and executives accountable for their actions.