Loading…
Sunday, September 21, 2014
Current Weather
Loading Current Weather....
Published: Saturday, 11/9/2013

U.S. seeks $864M from BofA over Countrywide loans

ASSOCIATED PRESS

NEW YORK — Federal prosecutors want Bank of America Corp. to pay about $864 million over losses incurred by the government after it bought thousands of home loans made by Countrywide Financial during the housing boom.

U.S. attorney Preet Bharara made the request in documents filed late Friday with the U.S. District Court in Manhattan.

A jury last month found Bank of America Corp., which acquired Countrywide in 2008, liable for knowingly selling thousands of bad home loans to Fannie Mae and Freddie Mac between August 2007 and May 2008.

The panel also returned the verdict against Countrywide and a former executive, Rebecca Mairone.

The trial related to mortgages the government said were sold at break-neck speed without regard to quality as the economy headed into a tailspin.

The government had accused the financial institutions of urging workers to churn out loans, accept fudged applications and hide ballooning defaults through a loan program called the Hustle, shorthand for high-speed swim lane, which operated under the motto, “Loans Move Forward, Never Backward.”

Bank of America, based in Charlotte, N.C., denied there was fraud.

Thousands of loans made through the Hustle program were sold to Fannie and Freddie, which packaged loans into securities and sold them to investors. The companies were effectively nationalized in 2008 when they nearly collapsed from mortgage losses.

In the filing Friday, Bharara asked the court to make the penalty on BofA equal to the maximum losses racked up from the Hustle program by the government-run mortgage buyers.

Bank of America spokesman Lawrence Grayson said Saturday that the lender plans to respond to the government’s penalty filing before a Nov. 20 deadline.

“We believe the filing overstates the volume of loans and the appropriate measure of damages arising from one narrow Countrywide program that lasted several months and ended before Bank of America acquired the company,” he said.

Bharara also wants the court to impose a penalty on Mairone — who prosecutors say was the driving force behind the Hustle program — that is in line with her ability to pay.

Mairone’s lawyer, Marc Mukasey in New York, said today that he intends to file papers with the court arguing there should be no penalties imposed on his client.

Countrywide, once the country’s largest mortgage lender, played a major role in the collapse of the housing market because of its heavy reliance on subprime mortgages. Facing serious financial challenges, it was acquired by Bank of America in 2008 in an all-stock deal valued at about $4 billion.

In 2010, Bank of America agreed to pay $600 million to settle class-action lawsuits claiming that Countrywide officials concealed mounting financial risks as they loosened lending standards during the housing boom. That same year, former Countrywide CEO Angelo Mozilo agreed to pay $67.5 million to settle accusations by the Securities and Exchange Commission that he had misled investors and engaged in insider trading.



Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. If a comment violates these standards or our privacy statement or visitor's agreement, click the "X" in the upper right corner of the comment box to report abuse. To post comments, you must be a Facebook member. To find out more, please visit the FAQ.

Related stories







Poll