Tuesday, June 21, 2016

BofA Hu$tle

"BofA $1.3 billion ‘Hustle’ judgment tossed by appeals court" by Patricia Hurtado Bloomberg News  May 23, 2016

Bank of America Corp.’s decision to fight government allegations that it defrauded Fannie Mae and Freddie Mac paid off as a federal appeals court threw out a judgment of almost $1.3 billion against the bank.

The bank’s Countrywide Financial unit was the first bank to be found at fault at trial by a federal jury for selling defective mortgage loans under a decades-old statute enacted during the savings-and-loans crisis. The civil fraud suit was one of several brought against banks by Manhattan US Attorney Preet Bharara using the law.

A federal appeals court in New York ruled on Monday that the government failed to prove the bank intended to defraud Fannie and Freddie when it sold them the mortgages. The court also threw out a $1 million penalty against Rebecca Mairone, a former executive who oversaw the creation of a program called the “hustle,” which sped up loan processing.

“This case was a massive government overreach from inception,” Josh Rosenkranz, who represented Mairone in her appeal, said on Monday.

The government only showed the bank sold mortgages that it knew weren’t of the quality promised in its agreements, which at worst, was only a breach of contract, the appeals court said.

“Fraudulent intent must be found at the time of the allegedly fraudulent conduct,” the appeals panel said.

Nice to know the courts are also controlled by the banks, 'eh? 

I suppose betting against the very same products they were selling was not intended.

“We are pleased with the appellate court’s decision,” Lawrence Grayson, a spokesman for the Charlotte, N.C.-based bank, said by phone. He declined to comment further.

The United States can ask the entire panel of the federal appeals court judges to reconsider the panel’s ruling. Jim Margolin, a spokesman for Bharara, declined to comment on the decision.

Bharara had alleged that Countrywide generated thousands of defective loans and sold them to the two home-mortgage finance companies now under government control. Countrywide sold the loans to boost revenue in the tightening credit market in mid-2007, according to evidence presented by the United States at trial. The program called the “high speed swim lane,” or the “hustle” ran until 2008.

Ever see Inside Job?

Under the system, underwriters who were trained to review the loans were “benched” in favor of “loan specialists,” or clerks who lacked sufficient training, the government said. The speed with which more than 28,800 loans were processed was reduced from 60 days to as little as 10 days, according to evidence the United States presented at trial. Safeguards were lifted to boost the number of loans the lender completed and sold to government-sponsored enterprises, or GSEs, government lawyers said.

Bharara sued under the Financial Institution Reform, Recovery, and Enforcement Act of 1989, or FIRREA. The statute, enacted during the savings-and-loan crisis of the 1980s, allows the government to sue an individual or group for fraud that affects a federally insured financial institution.

Countrywide, then based in Calabasas, Calif., was once the biggest US residential home lender, originating or purchasing about $1.4 trillion in mortgages from 2005 to 2007. The bulk of them were sold to investors as mortgage-backed securities. Countrywide earned at least $165 million using the “hustle,” US lawyers argued at trial....

And down the memory hole it went.



"A federal appeals court in Manhattan reinstated a civil antitrust case accusing 16 banks of hurting investors who bought securities tied to Libor by manipulating the interest-rate benchmark. Bank of America Corp. and Citigroup Inc. are among the defendants sued in the civil lawsuit in Manhattan. The appeals court overturned a 2013 ruling by US District Judge Naomi Reice Buchwald who said the investors had failed to show an antitrust injury that would permit them to sue under US law. About a dozen firms have paid almost $9 billion in fines to resolve investigations around the world into rigging of the key benchmark." 

They made a lot more of the fraud.

Also see: British Lay LIBOR Investigation to Rest

UPDATE: Bank of America to pay $415 million to settle SEC inquiry

They used billions of dollars of client money to finance its own trades that made them billions, but....

That should ease the stress.