Bank of America hit with $1.3B fine in mortgage fraud case
Bank of America Corp. has been ordered to pay a $1.3 billion fine as its penalty for selling thousands of bad loans to Fannie Mae and Freddie Mac, Bloomberg reported.
The Charlotte-based company, which is the fifth largest deposit taker in the Philadelphia region, was already found guilty at trial. But in Manhattan on Wednesday, U.S. District Judge Jed Rakoff handed down the fine for Bank of America's 'The Hustle' program, where loans made at Countrywide Financial were rushed through a 'High-Speed Swim Lane' or 'HSSL' and sold to Fannie Mae and Freddie Mac.
On the strength of whistleblower testimony that showed how the company instructed employees to quickly push bad loans off the bank's balance sheet and toward investors, BofA was found liable of defrauding Fannie and Freddie last year.
The Charlotte Business Journal has more on Bank of America's response to the fine, which is below the more than $2 billion originally sought by federal prosecutors.
BofA says it still doesn't agree with the fine and could appeal. 'We believe that this figure simply bears no relation to a limited Countrywide program that lasted several months and ended before Bank of America's acquisition of the company,' bank spokesman Lawrence Grayson says. 'We are reviewing the ruling and will asses our appellate options.' In addition to the bank, a former Countrywide mortgage executive, Rebecca Mairone, was fined $1 million for her role in the scheme.
Mortgage-related litigation is haunting BofA. The bank is currently negotiating a settlement with the U.S. Department of Justice over allegations that Countrywide sold faulty mortgage-backed securities to government-backed investors. Reports are that prosecutors will aiming the fine at $17 billion but BofA was negotiating for between $12 billion and $13 billion. Earlier this month, the bank reported a 43 percent drop in second-quarter profits, caused by declining mortgage revenue and rising litigation costs.
Jeff Blumenthal covers banking, insurance and law.
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