US seeks USD 864 million from BofA over Countrywide loans

New York, PTI | Updated : 10 November 2013, 01:07 PM

Federal prosecutors want Bank of America Corp. to pay about USD 864 million over losses incurred by the government after it bought thousands of home loans made by Countrywide Financial during the housing boom.

US attorney Preet Bharara made the request in documents filed late Friday with the US District Court in Manhattan. A jury last month found Bank of America Corp., which acquired Countrywide in 2008, liable for knowingly selling thousands of bad home loans to the government-run mortgage buyers, Fannie Mae and Freddie Mac, between August 2007 and May 2008.

The panel also returned the verdict against Countrywide and a former executive, Rebecca Mairone.

The trial related to mortgages the government said were sold at break-neck speed without regard to quality as the economy headed into a tailspin.

The government had accused the financial institutions of urging workers to churn out loans, accept fudged applications and hide ballooning defaults through a loan program called the Hustle, shorthand for high-speed swim lane, which operated under the motto, "Loans Move Forward, Never Backward."

Bank of America, based in Charlotte, North Carolina, denied there was fraud.

Thousands of loans made through the Hustle programme were sold to Fannie and Freddie, which packaged loans into securities and sold them to investors. The companies were effectively nationalized in 2008 when they nearly collapsed from mortgage losses.

In the filing Friday, Bharara asked the court to make the penalty on BofA equal to the maximum losses racked up from the Hustle program by Fannie and Freddie.

Bank of America spokesman Lawrence Grayson said on Saturday that the lender plans to respond to the government's penalty filing before a November 20 deadline.

"We believe the filing overstates the volume of loans and the appropriate measure of damages arising from one narrow Countrywide program that lasted several months and ended before Bank of America acquired the company," he said.

Bharara also wants the court to impose a penalty on Mairone, who prosecutors say was the driving force behind the Hustle programme, that is in line with her ability to pay.

Mairone's lawyer, Marc Mukasey in New York, said on Saturday that he intends to file papers with the court arguing there should be no penalties imposed on his client.

Countrywide, once the country's largest mortgage lender, played a major role in the collapse of the housing market because of its heavy reliance on subprime mortgages. Facing serious financial challenges, it was acquired by Bank of America in 2008 in an all-stock deal valued at about USD 4 billion.

First Published: Sunday, November 10, 2013 01:06 PM
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