The US government has asked Bank of America (BoA) to pay $863.6m as compensation for losses incurred due to the sale of defective home loans by its Countrywide Financial unit.
The bank and the unit’s former employee, Rebecca Mairone, were found liable for defrauding two US government-controlled mortgage firms, Fannie Mae and Freddie Mac, by selling defective loans purchased from Countrywide in 2007 and 2008.
The defective loans from the Countrywide Financial unit were known as the ‘high speed swim lane’ (HSSL) or Hustle, which allowed loans to be processed without even checking their quality.
Commenting on the penalties, the government in a filing in the US District Court in Manhattan said that the move was necessary "and to send a clear and unambiguous message that mortgage fraud for profit will not be tolerated."
The US government was quoted by Reuters as saying that Countrywide’s programme emphasised and rewarded employees for the quantity rather than the quality of loans produced, and eliminated checkpoints designed to ensure that loans were sound.
BoA, which acquired Countrywide in July 2008, had earlier said it is evaluating its options for appeal and is set to respond to the government’s penalty request by 20 November 2013.