After a four-week trial, a federal jury in New York found Bank of America liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called “Hustle” and sold them to Fannie Mae and Freddie Mac, the government said. The jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.
The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans. Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.
The lawsuit stemmed from a whistleblower case originally brought by Edward O’Donnell, a former Countrywide executive. The case centered on a program called the “High Speed Swim Lane” – also called “HSSL” or “Hustle” – that government lawyers said Countrywide started in 2007. The Justice Department contended that 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.
About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.
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, Case No. 12-01422.
While this case does not directly impact homeowners, I’m happy to see the government continuing to push to hold banks accountable for their role in the mortgage crisis.