Bank of America ordered to pay $1.27 billion for 'Hustle' fraud

Wed Jul 30, 2014 4:44pm EDT
 
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By Jonathan Stempel

NEW YORK (Reuters) - A federal judge on Wednesday ordered Bank of America Corp (BAC.N: Quote) to pay a $1.27 billion penalty for fraud over shoddy mortgages sold by the former Countrywide Financial Corp.

U.S. District Judge Jed Rakoff in Manhattan ruled after a jury last October found the second-largest U.S. bank liable for the sale by Countrywide of defective loans to government-controlled mortgage companies Fannie Mae FNMA.OB and Freddie Mac FMCC.OB

Rakoff also ordered former mid-level Countrywide executive Rebecca Mairone, who was also found liable and was the only individual charged, to pay $1 million, citing her "leading role" in the fraud and calling some of her testimony "implausible."

While the bank's penalty was below the $2.1 billion sought by the U.S. Department of Justice, it marks another legal defeat for Bank of America over its disastrous July 2008 purchase of Countrywide, which has cost tens of billions of dollars in litigation, loan buybacks and writedowns.

Bank of America has also held talks on another, potentially multi-billion-dollar settlement to resolve separate government probes into mortgage securities, including from Countrywide and its Merrill Lynch unit.

"BRAZEN"

The case centered on a Countrywide lending program that ended around May 2008, and which was known as "High Speed Swim Lane," "HSSL" or "Hustle."   Continued...

 
A Bank of America Merrill Lynch sign is seen on a building that houses its offices in Singapore May 17, 2012.  REUTERS/Tim Chong