Bank of America escapes $1.3B mortgage fraud penalty

Federal appeals court throws out 2013 verdict on sale of toxic mortgages to Fannie and Freddie

TRD NEW YORK /
May.May 24, 2016 04:24 PM

Bank of America is off the hook for a $1.27 billion fraud penalty for its Countrywide Financial division’s role in selling toxic mortgages to Fannie Mae and Freddie Mac in the buildup to the 2008 financial crisis.

On Monday, a Manhattan federal appeals court overturned a 2013 jury verdict that found Countrywide, which Bank of America acquired in 2008, fraudulently dumped the shoddy mortgages on the government-sponsored entities despite having promised to sell only investment-quality loans.

But the three-judge appeals court panel found that Countrywide did not engage in fraud because the sale of the toxic mortgages occurred after the contract on the deal was signed – with Judge Richard Wesley noting that “[a] party claiming fraud must prove fraudulent intent at the time on contract execution,” according to the New York Post.

Instead, Wesley said Countrywide’s substitution of the promised high-quality mortgages for shoddy loans was more akin to breach of contract than fraud, and that prosecutors would have to prove that Countrywide executives made the switch “with contemporaneous fraudulent intent.”

The appeals court also overturned a $1 million civil penalty on former Countrywide executive Rebecca Mairone, who was told by subordinates that the loans being sold to Fannie Mae and Freddie Mac fell short of their standards. [NYP]Rey Mashayekhi


Related Articles

arrow_forward_ios
The Coca-Cola building at 711 Fifth Avenue and Michael Shvo (Credit: Google Maps)

Michael Shvo, partners secure $545M loan for Coca-Cola building

Letitia James (Credit: Timothy A. Clary/AFP via Getty Images, iStock, Pixabay)

Real estate was among top consumer gripes in 2019

From left: 1578 Union Street in Brooklyn, Daniel Melamed (inset) and Eric Schneiderman (Credit: Google Maps, Getty Images, Facebook)

Overzealous investigators went too far in pursuit of Brooklyn landlord, appellate court rules

Paul Manafort and Manhattan District Attorney Cyrus Vance Jr. (Credit: Getty Images)

Judge tosses mortgage-fraud case against Manafort

Clockwise from the top left: Jackson Park at 28-40 Jackson Avenue, 240 Willoughby Street in Fort Greene, 664 Pacific Street in Brooklyn, and 247 Metropolitan Avenue in Williamsburg (Credit: StreetEasy, Google Maps, Pacific Park Brooklyn, The Pod Hotel)

These were the top 10 outer-borough loans last month

Jackson Park at 28-40 Jackson Avenue and Tishman Speyer's Rob Speyer (Credit: StreetEasy and Tishman Speyer)

Tishman Speyer locks in $1B in financing for Jackson Park

Florida man sentenced in $3.5M mortgage fraud scheme that targeted Orthodox Jewish community

Florida man sentenced in $3.5M mortgage fraud scheme that targeted Orthodox Jewish community

One Bryant Park (Credit: The Durst Organization)

Bank of America leads $1.6B refi for tower named after it at One Bryant Park

arrow_forward_ios
Loading...