Author Topic: Bank of America liable for Countrywide mortgages fraud  (Read 583 times)

0 Members and 1 Guest are viewing this topic.

Offline happyg

  • Hero Member
  • ****
  • Posts: 11,822
Bank of America liable for Countrywide mortgages fraud
« on: October 23, 2013, 06:37:31 PM »

By Nate Raymond


(Reuters) - Bank of America Corp was found liable for fraud on Wednesday on claims related to defective mortgages sold by its Countrywide unit, a major win for the U.S. government in one of the few big trials stemming from the financial crisis.

Following a four-week trial, a federal jury in Manhattan found the Charlotte, North Carolina bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called "Hustle" and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.

The four men and six women on the jury also found former Countrywide executive, Rebecca Mairone, liable on the one fraud charge facing her.

A decision on how much to penalize the bank would be left to U.S. District Judge Jed Rakoff. The U.S. Department of Justice has said it would ask Rakoff to award up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans.

Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.

"The jury's decision concerned a single Countrywide program that lasted several months and ended before Bank of America's acquisition of the company," Bank of America spokesman Lawrence Grayson said. "We will evaluate our options for appeal."

Wednesday's verdict marked a major victory for the Justice Department, which has come under criticism for failing to hold banks and executives accountable for their roles in the events leading up to the financial crisis.

In late afternoon trading, Bank of America shares were down 27 cents at $14.25 on the New York Stock Exchange.

WHISTLEBLOWER

The lawsuit stemmed from a whistleblower case originally brought by Edward O'Donnell, a former Countrywide executive who stands to earn up to $1.6 million if the government prevailed.

It centered on a program called the "High Speed Swim Lane" - also called "HSSL" or "Hustle" - that government lawyers said Countrywide started in 2007 as it sought to move away from subprime lending and issue prime loans.

Prime loans are considered less risky than subprime. But the Justice Department said fraud and other defects were rampant in HSSL loans, because Countrywide eliminated loan quality checkpoints and paid employees based on loan volume and speed.

The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending division.

Mairone later became a managing director at JPMorgan Chase & Co. That bank had no immediate comment.

In 2012, the Justice Department intervened in O'Donnell's lawsuit and filed its own complaint under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. That law, passed in the wake of the 1900s savings-and-loan scandals, covers fraud affecting federally insured financial institutions.

The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

(Reporting by Nate Raymond; Additional reporting by Jonathan Stempel; Editing by Leslie Gevirtz)

http://www.reuters.com/article/2013/10/23/us-bankofamerica-hustle-idUSBRE99M14B20131023

Offline truth_seeker

  • Hero Member
  • ****
  • Posts: 17,966
  • Common Sense Results Oriented Conservative Veteran
    • The place where argument addicts can go
Re: Bank of America liable for Countrywide mortgages fraud
« Reply #1 on: October 23, 2013, 06:44:32 PM »
The same top management that ran banks into the ground, are still managing banks now.

The top guy at Countrywide was Anthony Mozilo, walking free today.

Offline Rapunzel

  • Hero Member
  • ****
  • Posts: 71,719
Re: Bank of America liable for Countrywide mortgages fraud
« Reply #2 on: October 23, 2013, 08:53:46 PM »
IIRC Paulson pushed (as in forced) BofA to takeover the Countrywide loans.. as a matter of fact that entire August they were negotiating it because BofA was balking at taking these loans... so how can BofA be held responsible for loans they did not make and only took over under government duress?
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

Offline truth_seeker

  • Hero Member
  • ****
  • Posts: 17,966
  • Common Sense Results Oriented Conservative Veteran
    • The place where argument addicts can go
Re: Bank of America liable for Countrywide mortgages fraud
« Reply #3 on: October 24, 2013, 04:59:43 PM »
IIRC Paulson pushed (as in forced) BofA to takeover the Countrywide loans.. as a matter of fact that entire August they were negotiating it because BofA was balking at taking these loans... so how can BofA be held responsible for loans they did not make and only took over under government duress?
The merger documents should show what BofA agreed to be liable for.

So there is a bunch of contractual material, between Fedgov, Fedgov quasi-gov-agencies (FHA, Fannie, Freddie, various state and federal regulatory agencies, private loan insurers, the banks themselves, BofA, Countrywide, etc. etc.

In civil cases, documents rule the day usually. IOW what you agreed to on paper, signed, is what you are stuck with honoring.

But we have morphed into the era of "what is the meaning of is," so who knows what can be construed out of the hastily arranged mess.

My business intuition is this: A business put under the gun, in a hurry, to take over another faltering business, would demand a very big premium in exchange for the risks of unknowns, haste, etc.

Therefore I have assumed that Chase and BofA stood to make out well, in the end. I have not tracked in any way, and of course it could be going the other way.

I know that in my area, Chase now has a NEW branch every mile or so. Whatever idea of banking leaving stick-and-bricks-physical locations, for ATMs, online is countered by Chase's new locations.


Share me

Digg  Facebook  SlashDot  Delicious  Technorati  Twitter  Google  Yahoo
Smf