The Justice Department is asking for $833.6 million in damages to mitigate losses suffered by Fannie Mae and Freddie Mac, which bought the defective mortgages from Countrywide in 2007 and 2008. But Bank of America told U.S. District Judge Jed Rakoff Wednesday night that it should pay a maximum of $1.1 million – and preferably nothing.
According to prosecutors, Countrywide ran shoddy mortgages through a program known as “High Speed Swim Lane” or “Hustle,” in which underwriting standards were sacrificed for approval speed and volume. Thousands of the deficient mortgages were sold to Fannie and Freddie, which saw a gross loss of more than $848 million and a net loss of more than $131 million, according to Bloomberg. Countrywide, meanwhile, earned at least $165 million selling loans through the “Hustle” program.
Government lawyers took Bank of America to task during the trial for insisting that no fraud had occurred. In a Nov. 8 request for penalties, prosecutors said Bank of America “frequently defied both the evidence and common sense” by continuing to deny the fraud, Reuters reported.
Bank of America’s lawyers pounced on that tactic Wednesday. “The government's argument is offensive, suggesting a defendant should be more severely punished when it dares to defend itself against allegations of fraud which it truly believed were baseless -- and still does,” Bank of America said in a court filing. “The penalties in this matter should be zero.”
Lawyers for former Countrywide executive Rebecca Mairone, the only individual named in the case, also argued that she should pay no penalty after being found liable for fraud, according to Reuters.
“Ms. Mairone has already been severely punished, personally and professionally,” they said in a court filing. “Unjustly depicted in the media as the villainous face of the mortgage crisis and in professional limbo, Ms. Mairone is facing ruin, even as the full consequences of the verdict are not yet realized.”
You have to give Bank of America credit for chutzpah. The lending giant has asked a federal judge to impose no penalty despite being found liable for fraud over the sale of shoddy mortgages by its Countrywide Financial unit, according to a Reuters report.