[Occupymendocino] [Fwd: Bank of America ordered to pay $1.27 Billion for 'Hustle' fraud, Jonathan Stempel, Reuters, 20140731]

[agnes at mcn.org]

---------------------------- Original Message ----------------------------
Subject: Bank of America ordered to pay $1.27 Billion for 'Hustle' fraud,
Jonathan Stempel, Reuters, 20140731
From:    "Dan Hamburg" <vote at pacific.net>
Date:    Thu, July 31, 2014 11:19 am
To:      "Dan Hamburg" <vote at pacific.net>
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thanks to Janie¦



it was the first case to impose civil penalties against a bank and
executive under FIRREA to punish mortgage fraud leading up to the 2008
financial crisis.





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





by Jonathan Stempel

Reuters

July 31, 2014



NEW YORK



A federal judge on Wednesday ordered Bank of America Corp 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 and Freddie Mac



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 write downs.



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." 
Investigators said the program emphasized quantity over quality, rewarding
employees for producing more loans and eliminating checkpoints designed to
ensure the loans' quality.



"While the HSSL process lasted only nine months, it was from start to
finish the vehicle for a brazen fraud by the defendants, driven by a
hunger for profits and oblivious to the harms thereby visited, not just on
the immediate victims but also on the financial system as a whole," Rakoff
wrote.



The Charlotte, North Carolina-based bank's liability was based on the
$2.96 billion that Rakoff said Fannie Mae and Freddie Mac paid Countrywide
for 17,611 suspect Hustle loans.



Rakoff said this was the appropriate standard under the Financial
Institutions Reform, Recovery and Enforcement Act (FIRREA), which was
adopted after the 1980s savings and loan scandal and the basis for Bank of
America's liability.



The $1.27 billion penalty reflected findings by a government expert that
only some of the loans had material defects, while others were acceptable,
Rakoff said.



"SCAPEGOATED"



Bank of America has said no penalty was justified, and spokesman Lawrence
Grayson said the $1.27 billion award "simply bears no relation to a
limited Countrywide program that lasted several months." An appeal is
possible, he said.



According to her LinkedIn page, Mairone, who now uses her maiden name
Rebecca Steele, recently started her own firm after working at Bank of
America and then JPMorgan Chase & Co . The government had sought $1.2
million from her.



"Rebecca never intended to defraud anyone and never did defraud anyone,"
her lawyer Marc Mukasey said. "Unfortunately, more powerful people chose
her as a scapegoat because they thought she was an easy target. We will
fight on to clear her name."



U.S. Attorney Preet Bharara in New York said the verdict and penalties
show that mortgage fraud "cannot be viewed as simply another cost of doing
business in the financial world."



Bharara said it was the first case to impose civil penalties against a
bank and executive under FIRREA to punish mortgage fraud leading up to the
2008 financial crisis.



"I don't see much downside to an appeal, if this is the first time a judge
has imposed liability in this context," said Carl Tobias, a University of
Richmond law professor.



The case was originally brought by former Countrywide vice president
Edward O'Donnell, a whistleblower who later joined Fannie Mae. He declined
to comment.



Rakoff began by noting that the Justice Department has not brought
criminal charges over loan practices at Countrywide, widely seen as a key
factor in the recent U.S. housing crisis.



He also noted that Countrywide's three top officials, including former
Chief Executive Angelo Mozilo, settled U.S. Securities and Exchange
Commission civil charges without addressing whether they did anything
wrong.



The case is U.S. ex rel O'Donnell v. Bank of America Corp et al, U.S.
District Court, Southern District of New York, No. 12-01422.





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