DOJ gives up in fight over massive Bank of America, Countrywide ‘Hustle’ fine

Servicing

The fight between Bank of America and the federal government over the $1.27 billion penalty levied against Bank of America in a fraud case over defective mortgages sold by Countrywide in the run-up to the housing crisis is now officially over.

And the victor is Bank of America.

According to a report from the Wall Street Journal, the Department of Justice chose not to pursue the case any further and allowed the final deadline for appeal to pass, meaning that Bank of America beat the government in one of the biggest cases to come from the financial crisis.

The fight first began 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.

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.

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

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

But in May of this year, the Second Circuit Court of Appeals overturned the lower court’s decision, ruling that the government did not prove that Countrywide (and Bank of America) knowingly committed fraud when they sold the defective mortgages to Fannie Mae and Freddie Mac.

The Second Circuit’s decision also voided the $1 million penalty against Rebecca Mairone, who 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 August, the government asked the Second Circuit to reconsider its decision, a request that the Second Circuit denied.

According to Wall Street Journal report, Monday, November 21 was the deadline for the government to appeal the decision to the Supreme Court, and the government elected to throw in the towel.

Now, the Hustle case and the accompanying $1.27 billion fine is dead and buried.

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