A federal jury has spoken, holding Bank of America (BAC) – and more specifically the Countrywide unit it took over –liable for defrauding Fannie Mae and Freddie Mac in the sale of toxic home loans, Bloomberg reports.
A federal jury in New York delivered a black eye not only to BofA, but to former Countrywide executive Rebecca Mairone, who was on trial for allegedly defrauding the U.S., the publication said.
The case revolved around accusations that Countrywide, which BofA took over during the financial crisis, did not represent some of the risks tied to the loans, causing major losses at the enterprises later on.
The government thus far has asked for $848 million in the case, but a penalty has yet to be set, Bloomberg said.
The publication has more on this precedential decision:
“The U.S. last year joined a whistle-blower action against Bank of America filed by former Countrywide executive Edward O’Donnell. The case is the first brought by the U.S. against a bank over defective mortgages to go to trial.”
“Mairone took the stand in her own defense, telling jurors she wasn’t part of a scheme to defraud Fannie Mae and Freddie Mac. She said Countrywide considered risks before instituting HSSL and came up with plans to deal with them.”