BOA to judge: Our penalty for fraud should be zero

by Ryan Smith21 Nov 2013
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.

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.”
 
 

COMMENTS

  • by Joel Epstein | 11/21/2013 9:31:17 AM

    Chutzpah is the perfect term to describe BofAm's actions and attitude. The judge should double the penalty.
    Still amazed that virtually no one has been held personably accountable for wrecking the industry and economy.

  • by Anon | 11/21/2013 9:38:44 AM

    B.S.: B of A was forced to acquire CWB with a gun to its head. The institution CWB was bankrupt and this was a favor to taxpayers, the administration and the economy. Am I the only one that sees these penalties as an extortion scheme by our Federal Government and our so-called Justice Department, literally the theft of the shareholders' equity of these punlicly held banks? B of A did not commit these frauds; CWB DID and the person giving testimony spoke the exact truth.

  • by Tom | 11/21/2013 9:53:16 AM

    I agree with Anon, this was a forced purchase of Countrywide by B of A at the direction of our government. The Feds knew there were issues with Countrywide and had B of A bail them out and now want to fine B of A for something that B of A had no part in. Another example of this governments extortion tactics

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