DOJ again rebuked in effort to enforce massive BofA ‘Hustle’ mortgage fine

Servicing

Needless to say, the federal government probably isn’t too happy with the United States Court of Appeals for the Second Circuit right now.

That’s because for the second time in three months, the Second Circuit rebuked an effort by the government to extract one of the largest fines to come out of the housing crisis.

In May, the Second Circuit overturned a $1.27 billion penalty against Bank of America in a fraud case over defective mortgages sold by Countrywide in the run-up to the housing crisis.

And Monday, the Second Circuit denied the government’s request to reconsider its decision, according to a report from the Wall Street Journal.

The fine stemmed from the government suing Bank of America over Countrywide’s “High Speed Swim Lane” or “HSSL” loan origination process. The “HSSL” program became known as “Hustle,” and was characterized by the program’s speed in underwriting loans.

The government initially secured a victory over Bank of America in 2013 when a federal jury held Bank of America and Countrywide liable for defrauding Fannie Mae and Freddie Mac by selling toxic mortgage loans to the government-sponsored enterprises.

In 2014, a federal judge ruled that Bank of America should pay more than $1 billion in fines for the Hustle loan sales. The government sought more than $2 billion in the case.

Later that year, Bank of America asked U.S. District Judge Jed Rakoff in Manhattan to throw out the jury verdict, which he denied in 2015.

But earlier this year, the Second Circuit tossed the lower court’s decision, stating that the government did not prove that Countrywide (and therefore Bank of America) committed fraud when they sold toxic mortgages to Fannie Mae and Freddie Mac.

The Second Circuit’s May decision also voided the $1 million penalty against Rebecca Mairone, who the New York Times once referred to as the “face of the housing crisis.” Mairone, who now goes by her maiden name, Rebecca Steele, is a former executive at Countrywide and one of the few individuals whose actions during the housing crisis landed them in legal trouble with the government.

In the wake of its initial defeat in the Second Circuit, the government pushed to have the case revived.

But, according to the Wall Street Journal, the Second Circuit said Monday it considered the government’s request to reconsider the decision and is choosing to deny that request.

The WSJ report states that the Second Circuit judges chose not to “elaborate” on the reason for the decision.

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