Bank of America to pay $1.27 billion for mortgage fraud

[JURIST] A federal judge on Wednesday imposed [opinion; PDF] a $1.27 billion penalty on Bank of America [corporate website] after a jury found them liable for mortgage fraud. Judge Jed Rakoff [official profile] for the US District Court for the Southern District of New York [official website] ruled after a jury found that Bank of America, the second largest bank in the US, had defrauded government-controlled mortgage companies Fannie Mae and Freddie Mac [corporate websites], by selling them defective mortgages through their subsidiary Countrywide Financial Corp. One Countrywide executive, Rebecca Mairone, was also charged and ordered to pay $1 million for her "leading role" in the fraud. Bank of America is expected to appeal the judgment.

Mortgage fraud cases continue to be litigated in the wake of the 2008 financial crisis. Earlier this month Citigroup, Inc. [corporate website] agreed [JURIST report] to pay a $7 billion to settle a federal inquiry into mortgage-backed securities sold by the bank prior to the financial crisis. The US Supreme Court [official website] granted certiorari [JURIST report] in April to hear a mortgage lending case in which Countrywide failed to provide required information and the borrowers attempted to rescind the loan. In February the Supreme Court heard oral arguments [JURIST report] on a subprime mortgage fraud case. Earlier that month JPMorgan Chase [corporate website] paid [JURIST report] a $614 million settlement to the US government for its role in approving unqualified mortgages for government insurance.

 

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