On the heels of a federal jury ruling that Bank of America Corp. was liable for fraud over defective mortgages sold by its Countrywide unit, the U.S. government has called upon the country’s second largest lender to shell out $863.6 million in damages.
The government also asked for penalties against Rebecca Mairone, a former executive at the bank’s Countrywide unit who the jury also found liable, “commensurate with her ability to pay,” according to a Nov. 8 filing in U.S. District Court in Manhattan.
The government said the penalties were necessary to punish the bank and Mairone “to send a clear and unambiguous message that mortgage fraud for profit will not be tolerated.”
The U.S. government alleges that Countrywide and BofA defrauded Fannie Mae and similar mortgage-finance firm Freddie Mac through a program called the High Speed Swim Lane, also known as Hustle. In Hustle, the government says Countrywide systematically removed quality controls and relied more heavily on automated loans, resulting in a higher loan default rate.
Mairone took the stand in U.S. District Court in Manhattan on Oct. 15 in order to defend her former company from allegations of fraud. Mairone was the only individual defendant named in the government’s suit, and according to trial testimony, the government claimed Mairone ignored potential safety concerns related to Hustle.
Mairone, who now works as an executive at J.P. Morgan Chase, claims she did not ignore the concerns of the automation program, like the government says. Instead, Mairone told the court that she believed Hustle would increase overall loan quality by making the loan process more efficient and streamlined, limiting the people processing loans.
For more coverage on Bank of America and Countrywide, check out the InsideCounsel stories below: