Ex-Countrywide executive denies fraud at BofA trial over mortgages

Wed Oct 16, 2013 4:33am EDT
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By Joseph Ax

NEW YORK (Reuters) - A former executive of Bank of America's (BAC.N: Quote) Countrywide unit told a federal jury on Tuesday that she did not knowingly sell toxic mortgages to Fannie Mae and Freddie Mac in the run-up to the financial crisis.

Rebecca Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending Division, is the lone individual defendant in the lawsuit brought by the U.S. government against the bank, which acquired Countrywide in 2008.

The trial, now in its fourth week in U.S. District Court in Manhattan, is centered on the government's allegations that Countrywide defrauded Fannie Mae FNMA.OB and Freddie Mac FMCC.OB, the government-sponsored mortgage finance companies, by selling them thousands of defective mortgages. Countrywide sped up approvals to unqualified lenders in a process it called the "high-speed swim lane" (HSSL), or "Hustle."

Mairone, who oversaw the process, is one of only a handful of individual defendants in lawsuits the government has filed against major financial institutions over improper mortgage practices since the housing market meltdown. The Countrywide case is the first such case to reach trial.

At the start of Mairone's testimony, her lawyer, Marc Mukasey, asked a series of questions about whether she had deliberately sold substandard mortgages to Fannie and Freddie.

"No, never," she replied.

She said she believed HSSL would actually improve loan quality and that the company had controls in place to manage risks. Mairone, 46, is now a managing director at JPMorgan Chase & Co (JPM.N: Quote).

During cross-examination, Assistant U.S. Attorney Jaimie Nawaday questioned Mairone about compensation plans for loan specialists and others, which included bonuses for funding a certain number of mortgages each month.   Continued...

The logo of the Bank of America is pictured atop the Bank of America building in downtown Los Angeles November 17, 2011. REUTERS/Fred Prouser