NY jury: Bank of America liable in mortgage fraud
Bank of America Corp., accused of lying about the quality of mortgages it passed
along to financial firms Fannie Mae and Freddie Mac, was found liable for fraud
on Wednesday in a civil case the government said captured the frenzied pursuit
of profits at all costs just before the economy collapsed in 2008.
Manhattan jury returned its verdict following a month-long trial focusing on
prime mortgages that Bank of Americaâ€™s Countrywide Financial unit completed in
late 2007 and 2008. U.S. District Judge Jed S. Rakoff said he would determine on
Thursday when a penalty phase will begin.
The verdict was returned
against Bank of America, Countrywide and a former executive, Rebecca
Bank of America, which had denied there was fraud, said
Wednesday it was evaluating its options for appeal.
â€œThe juryâ€™s decision
concerned a single Countrywide program that lasted several months and ended
before Bank of Americaâ€™s acquisition of the company,â€ spokesman Lawrence Grayson
said by email.
Maironeâ€™s lawyer Marc Mukasey called her â€œa model of
honesty, integrity and ethics.â€
â€œShe never engaged in any fraud because
there was no fraud,â€ he said.
U.S. Attorney Preet Bharara said the
companies and Mairone were â€œliable for making disastrously bad loans and
systematically removing quality checks in favor of (Bank of America and
â€œIn a rush to feed at the trough of easy
mortgage money on the eve of the financial crisis, Bank of America purchased
Countrywide, thinking it had gobbled up a cash cow,â€ he said in a statement.
â€œThat profit, however, was built on fraud, as the jury unanimously
The trial related to mortgages the government said were sold at
break-neck speed without regard to quality as the economy headed into a
The government had accused the financial institutions of urging
workers to churn out loans, accept fudged applications and hide ballooning
Assistant U.S. Attorney Jaimie Nawaday, in her closing
argument, said the case was about â€œgreed and lies.â€
â€œIt is about people
at Countrywide saying to each other that their loan quality is in the ditch,
while telling Fannie Mae and Freddie Mac that their loans are investment
quality,â€ she said.
Fannie and Freddie, which packaged loans into
securities and sold them to investors, were effectively nationalized in 2008
when they nearly collapsed from mortgage losses.
Government lawyers said
Countrywide tried to churn out more mortgage loans through a program called the
Hustle, shorthand for high-speed swim lane, which operated under the motto,
â€œLoans Move Forward, Never Backward.â€
The government said the program
eliminated checks meant to ensure mortgages were made to borrowers unlikely to
â€œThe Hustle is all about speed, lightning speed and volume and
never about quality,â€ Nawaday told jurors.
Bank of America lawyer Brendan
V. Sullivan Jr. said in closings there was no fraud.
â€œWe have been
dragged down the rabbit hole into Alice in Wonderland,â€ he said.
defended the companyâ€™s practices, saying there was a â€œvigorous quality control
programâ€ that included 20 workers in India who studied mortgage files through
the night for flaws.