Another day and another ruling against a bank for fraudulent practices. A New York judge has ruled that Bank of America’s Countrywide business must pay the US government $1.3bn for selling defective home loans. Former Countrywide executive Rebecca Mairone must also pay $1m.
A BBC report says Countrywide was found guilty of selling bad loans, as part of a programme called “hustle”, to US mortgage giants Fannie Mae and Freddie Mac in 2007.
Bank of America has spent nearly $40bn on legal matters relating to the housing market collapse, and the bank is expected to announce a multi-billion dollar settlement with US regulators over similar charges in the coming weeks.
The “hustle” suit came about after Edward O’Donnell, a former Countrywide executive, issued a whistleblower complaint alleging fraud.
Mr O’Donnell said a programme Countrywide instituted in 2007 known internally as the “high-speed swim lane” (also known as “HSSL” or “hustle”) did not properly screen mortgage applications, and that employees – who were paid based on loan volume and speed of processing – were give incentives to approve loans.