Bank of America liable for Countrywide loan fraud

Bank of America Corp. was found liable for fraud Wednesday on claims related to defective mortgages sold by its Countrywide unit.

The jury decision was a major win for the U.S. government in one of the few big trials stemming from the financial crisis.

Following a four-week trial, a federal jury in Manhattan found the Charlotte, N.C., bank liable on one civil fraud charge. Countrywide originated shoddy home loans in a process it called "Hustle" and sold them to government mortgage giants Fannie Mae and Freddie Mac, the government said.

The four men and six women on the jury also found Rebecca Mairone, a former Countrywide executive, liable on the one fraud charge facing her.

A decision on how much to penalize the bank would be left to U.S. District Judge Jed Rakoff. The U.S. Department of Justice has said it would ask Rakoff to award up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans.

Bank of America bought Countrywide in July 2008. Two months later, the government took over Fannie and Freddie.

"The jury's decision concerned a single Countrywide program that lasted several months and ended before Bank of America's acquisition of the company," Bank of America spokesman Lawrence Grayson said. "We will evaluate our options for appeal."

The lawsuit centered on a program called the "High Speed Swim Lane" -- also called "HSSL" or "Hustle."

The Justice Department said fraud and other defects were rampant in HSSL loans, because Countrywide eliminated loan quality checkpoints and paid employees based on loan volume and speed. -- Reuters