Federal Jury Finds Bank of America Guilty of Mortgage Fraud

Federal Jury Finds Bank of America Guilty of Mortgage Fraud

 NEW YORK — (Mealey’s) A federal jury on Oct. 23 found Bank of America Corp., as successor to Countrywide Financial Corp., and a former Countrywide employee guilty of engaging in a scheme to defraud Fannie Mae and Freddie Mac in connection with Countrywide’s residential mortgage lending business, according to a statement released by the U.S. Attorney for the Southern District of New York Preet Bharara (United States of America v. Bank of America Corp., et al., No. 12-1422, S.D. N.Y.; See November 2012, Page 47).

“Almost a year to the day after we brought suit, a unanimous jury has found Countrywide, Bank of America, and senior executive Rebecca Mairone liable for making disastrously bad loans and systematically removing quality checks in favor of its own balance.  As demonstrated at trial, they adopted a program that they called ‘the Hustle,’ which treated quality control and underwriting as a joke,” Bharara said.

The government filed its complaint on Oct. 24, 2012, in the U.S. District Court for the Southern District of New York, naming Bank of America and Bank of America N.A. (collectively, Bank of America), as successor to Countrywide Financial Corp. and Countrywide Home Loans (collectively, Countrywide), and Mairone as defendants.

The Hustle

The government alleged that Countrywide engaged in a scheme to defraud Fannie Mae and Freddie Mac by “rolling out a new ‘streamlined’ loan origination model call the ‘Hustle,’” in which it “eliminated every significant checkpoint on loan quality and compensated its employees solely based on the volume of loans originated, leading to rampant instances of fraud and other serious loan defects, all while Countrywide was informing [Fannie Mae and Freddie Mac] that it had tightened its underwriting guidelines.”

The government sought to recover treble damages and penalties under the False Claims Act and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act.

The government is represented by Bharara and Assistant U.S. Attorneys for the Southern District of New York Pierre G. Armand and Jaimie L. Nawaday in New York.

Counsel

Bank of America is represented by Brendan V. Sullivan Jr., Adam J. Podoll, Allison B. Jones, Amy Saharia, Catherine Saudek Duval, Craig D. Singer, Enu A. Mainigi, Eric D. Blankenstein, Jennifer L. Gibbons, Jennifer N. Winsett Pusateri, Kannon K. Shanmugan, Katherine Carney Hayes, Kenneth C. Smurzynski, Lauren K. Collogan, Malachi Brown Jones Jr., Matthew Blumenstein, Ryan T. Scarborough, Stephen L. Urbanczyk, Steven M. Cody and Stewart Hill Ackerly of Williams & Connolly in Washington, D.C.

Mairone is represented by Daniel S. Meyers, Konstantin Chelney, Marc L. Mukasey, Marvin R. Lange, Michael C. Hefter, Ryan M. Philp, Seth M. Cohen and David Lawton of Bracewell & Giuliani in New York.

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