May 25, 2018

Countrywide Acquisition Still Haunts BofA

-A A +A

Countrywide Acquisition Still Haunts BofA

Bank of America is getting stuck with another bill: loans that turned sour during the housing crisis stemming from its acquisition of Countrywide Financial, the Los Angeles Times reports.

Bank of America has been ordered by a New York judge to pay nearly $1.3 billion in penalties in a civil fraud case centering around a mortgage program that Countrywide had nicknamed "the hustle." The short-lived program had fast-tracked the processing of mortgage applications from August 2007 through May 2008.

Shortly after, Bank of America had acquired Countrywide, the nation's largest home lender at the time. BofA officials say the bank never oversaw the program and deny any wrongdoing in the matter.

The government had originally sought $2.1 billion in the case, but a judge granted only half of that after a jury decided in a monthlong trial that Countrywide and one of its former executives were liable for selling thousands of bad loans to Fannie Mae and Freddie Mac.

"It was, from start to finish, the vehicle for a brazen fraud by the defendants, 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," wrote U.S. District Judge Jed Rakoff.

Bank of America, like many other lenders, is facing court cases and settlements over loans that went bad from the housing crisis. In March, the bank agreed to pay $5.8 billion to settle toxic mortgage securities, with most of the bonds stemming from Countrywide.

Bank of America officials say they may appeal the court's latest decision.

"We believe that this figure simply bears no relation to a limited Countrywide program that lasted several months and ended before Bank of America's acquisition of the company," according to BofA officials.

Source: “BofA Ordered to Pay $1.3 Billion Over Countrywide Lending Program,” Los Angeles Times (July 30, 2014)