A U.S. judge has ordered Bank of America to pay over US$1 billion for reckless lending in the run up to the financial crisis by Countrywide, a firm that it acquired at the height of the crisis.
On Wednesday, U.S. district court judge, Jed Rakoff, ordered that the bank pay almost US$1.3 billion for violations caused by Countrywide’s lending activities, and the subsequent sale of so-called “toxic” mortgages to Fannie Mae and Freddie Mac.
“Today, Judge Rakoff imposed stiff penalties in a case brought by this Office to punish and deter the fraudulent and reckless lending activities of a financial institution leading up to the financial crisis in 2008,” said U.S. attorney, Preet Bharara, in a statement.
Bharara noted that, after a four-week trial, a jury convicted Countrywide and a former executive of mail and wire fraud. Rakoff ordered penalties in the case based on the amount that Fannie and Freddie paid for fraudulently misrepresented loans. The former executive was also ordered to pay a civil penalty $1 million to the U.S. government.
“Throughout a year-long litigation and month-long trial, Bank of America claimed that the government had no case,” Bharara said. “After the jury said otherwise, Bank of America claimed that it should pay no penalty at all, arguing that the victims were not harmed and that the bank did not profit from this massive fraud. Judge Rakoff’s opinion squarely and emphatically rejects the bank’s claims which, besides ignoring the victims’ out-of-pocket losses, also ignored that the fraudulent conduct required penalties to be paid for punitive and deterrence purposes as well.”
Bharara added: “The jury verdict and subsequent imposition of penalties make clear that mortgage fraud cannot be viewed as simply another cost of doing business in the financial world.”