July 31, 2014 in Business

Bank of America fined $1.3 billion for actions by Countrywide

Ken Sweet Associated Press
 

NEW YORK – A federal judge imposed a $1.3 billion civil penalty against Bank of America on Wednesday for its role in selling risky mortgages to Fannie Mae and Freddie Mac that were advertised as safe investments.

The fine was against Countrywide Financial, which Bank of America purchased in 2008 as the financial crisis was unfolding. It is the latest legal ruling against Wall Street.

A jury found in October 2013 that BofA was liable for Countrywide’s role in selling risky loans to the government housing agencies through a program nicknamed the “Hustle” from August 2007 to May 2008. The jury found that Countrywide executives deliberately misrepresented the quality of mortgages being sold.

In his blunt ruling, Judge Jed Rakoff said the program was “driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.”

This is the first time a bank or its executives have been found liable under federal law for mortgage fraud leading up to the financial crisis, said Preet Bharara, U.S. Attorney for the Southern District of New York, in a statement. It is also the first time civil penalties have been imposed on a bank or its executives for mortgage fraud.

“(It is) clear that mortgage fraud cannot be viewed as simply another cost of doing business in the financial world,” Bharara said.

A spokesman for Bank of America, based in Charlotte, North Carolina, said the bank is exploring its legal options following Rakoff’s decision, including an appeal.

“We believe (the penalty) simply bares no relation to a limited Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company,” BofA spokesman Larry Grayson said.

Rakoff imposed a separate $1 million penalty against Rebecca Mairone, a former Countrywide executive, for her role in the program.

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