Bank of America’s Countrywide mortgage unit approved home loans in as little as 13 minutes, a whistleblower testified during the lender’s fraud trial last week.
According to a Bloomberg report, former Countrywide official Edward O’Donnell testified Friday that Countrywide had sold mortgages to Fannie Mae and Freddie Mac “that clearly didn’t qualify as investment grade.”
The Justice Department claims that Countrywide pushed the loans through a program called “High Speed Swim Lane” or “Hustle” – a program which streamlined the underwriting process by ignoring quality standards and paying employees based on the number of loans they processed.
"Hustle was not about quality," government attorney Pierre Armand told the court Tuesday. "It was about speed. It was about volume. It was about profits."
According to Reuters, the DOJ estimates that Fannie and Freddie saw a $131.2 million net loss and an $848.2 million gross loss on the Countrywide loans. The government contends that Countrywide sold the loans to Fannie and Freddie knowing that many borrowers wouldn’t be able to repay them.
O’Donnell testified Friday that the Hustle program and a program called New Customer Acquisition resulted in loans being approved before their quality could possibly have been vetted – including at least one loan, made in 2007, that went through the entire approval process in just 13 minutes, Bloomberg reported.
Bank of America contends that no fraud was committed, pointing out that it did not acquire Countrywide until after the Hustle program had ended.
Brendan Sullivan, attorney for Bank of America, said Tuesday that the lending giant’s Countrywide unit never intended to defraud anyone, Reuters reported. Sullivan said that Fannie and Freddie “knew the risks, knew the process,” but never complained about the quality of the loans Countrywide sold them.
“No one came to the door saying, 'We don't like your product,'" Sullivan said.
Countrywide has cost Bank of America more than $40bn in legal expenses, settlements and real-estate losses since the lender acquired the ailing company for about $2.5bn in 2008. “It is the worst deal in the history of American finance,” business professor Tony Plath told the Wall Street Journal in 2012. “Hands down.”