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Bank of America found liable for Countrywide’s $850M in fraud

When Bank of America acquired Countrywide in 2008, they also acquired their problems. And fraud.

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Bank of America found liable for Countrywide “Hustle” program

Bank of America has been found by a federal jury to be liable for the Countrywide Financial “Hustle” program, wherein Countrywide employees knowingly sold bad home loans to Fannie Mae and Freddie Mac. The penalties the bank now faces could approach $850 million, not to mention a $40 billion in court costs they’ve racked up since the 2008 acquisition of Countrywide.

The lawsuit named Bank of America, and former Countrywide executive, Rebecca Mairone, alleging that the “Hustle” program (which stood for the “High Speed Swim Lane”) was a deliberate move to do away with the standard challenges of loan approval, and that ignoring these underwriting standards and safeguards, Countrywide was able to quickly sign off on millions of dollars worth of loans they would never have been able to make otherwise. The most damming allegation is that Countrywide set this program up so they could sell the home loans to unsuspecting Fannie and Freddie in short order.

$850M in loans defaulted, feds say

Nearly half of all loans sold by Countrywide as part of the Hustle defaulted, leaving their new owners at Bank of America holding the bag. The federal jury found Bank of America liable on one civil fraud charge of deceiving Fannie and Freddie and failing to disclose their illegal process. The $850 million penalty the Department of Justice (DOJ) is requesting is the amount Fannie and Freddie lost on these loans.

Initially, under the False Claims Act, triple damages were sought, claiming that Countrywide made fraudulent claims for payment to government officials, but because Bank of America lawyers successfully argued that Hustle ended before Fannie and Freddie were bailed out by the government, the judge dismissed the charges.

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Bank of America continues to assert that Hustle ended before they acquired Countrywide, and has stated that the original intent of the program was to expedite, not skirt the home loan process. They will likely appeal the jury’s decision.

Focus on Rebecca Mairone

Former Countrywide executive, Rebecca Mairone is now at JPMorgan Chase, overseeing the foreclosure-review department who, despite yesterday’s ruling finding her guilty of civil fraud, maintains her innocence.

Dr. L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City and Senior Scholar at the Levy Economics Institute of Bard College, details his public battle with Mairone a few years back when he published a piece in the Huffington Post calling for Bank of America to be put into receivership, and Mairone was tasked to counter in the same publication.

Dr. Wray points out that Mairone failed to address any of the allegations he made of illegal behavior. “Stop the fraudsters,” Dr. Wray writes. “Stop the foreclosures. There should be an immediate 5 year Country-Wide moratorium on foreclosures. Investigate the fraud. Jail the fraudsters. Put the biggest banks into receivership. Begin to clean-up the document mess created by the banks and MERS (the banks lost or destroyed all the records of property ownership). Our economy will not recover until this is done.”

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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