Bank of America and executive to pay damages for shoddy loans under the 'Hustle' program
The US government has sought to have Bank of America Corp pay nearly USD863.6 million in damages after a federal grand jury found the bank liable for fraud for defective mortgages sold through its Countrywide unit.
In documents filed late last Friday in Manhattan's US District Court, the government also asked that penalties be imposed against Rebecca Mairone. Mairone was the midlevel executive at the Countrywide unit of BofA who the jury also found liable for fraud and imposed a penalty at the amount 'commensuratre with her ability to pay,'
According to government prosecutors, the penalties were necessitated to punish the bank and Mairone as well as 'send a clear and unambiguous message that mortgage fraud for profit will not be tolerated.'
The case was about a mortgage lending process undertaken at Countrywide, which the bank had acquired back in 2008. The program was called 'High Speed Swim Lane' or "HSSL" in the alternative. It had earned the nickname the 'Hustle'. As a result, Bank of America and Mairone were both found guilty of fraud perpetrated upon government controlled companies such as Fanne Mae and Freddie Mac by selling the shoddy loans acquired from Countrywide between 2007 and 2008.
The government said the 'Hustle' emphasized and rewarded employees for the quantity of the loans instead of the quality of the loans produced. The process also eliminated the checkpoints designed to ensure the said loans were of sound value.
Bank of America is the second largest bank in the United States. It had said previously that it is evaluating its appeal options and have until November 20 to respond to the request of government for its position paper on the penalty imposed.
According to BofA spokesperson Lawrence Grayson, "We believe the filing overstates the volume of loans and appropriate measure of damages arising from one narrow Countrywide program that lasted several months and ended before Bank of America acquired the company."