Bank of America is asking a federal judge to throw out a jury verdict that found it liable for fraud over mortgages sold by Countrywide Financial Corp.
In court filings Thursday, the Charlotte bank requested a judgment in its favor or a new trial, after the same judge in July ordered it to pay civil penalties of $1.27 billion in the so-called “Hustle” case. The bank was ordered to pay the penalties after a jury last year found Countrywide liable for knowingly selling bad home loans to mortgage giants Fannie Mae and Freddie Mac.
Bank of America, which bought Countrywide in 2008, said in the court filings that evidence presented at trial showed the quality of the Hustle loans was “well within” the standards Fannie and Freddie expected. The bank also claimed that Countrywide did not misrepresent the quality of the loans when it sold them.
The two mortgage giants “received exactly what they paid for,” Bank of America said in the filings.
The bank’s request to have the verdict tossed came exactly a week after it reached a record $16.65 billion settlement with the U.S. government.
That deal, the biggest civil settlement between a single company and the government, resolved a variety of civil investigations into the bank, including charges that it and companies it bought misled investors about the quality of bonds backed by home loans.
The record settlement means the second-largest bank by assets has resolved much of its remaining litigation stemming from the financial crisis. So far, the bank has spent more than $70 billion on crisis-era legal issues, more than any other lender has paid to resolve similar matters.
Filed in 2012, the Hustle lawsuit is among the bank’s remaining cases resulting from the crisis.
The case stemmed from Countrywide whistleblower Edward O’Donnell. The government took over the suit, which became the first civil fraud case brought by the Department of Justice over mortgage loans sold to Fannie or Freddie.
The government alleged that the Hustle program rapidly processed loans without regard for their quality.
In reaching its verdict in October, the jury also found former Countrywide executive Rebecca Mairone liable for her role in the Hustle program.
New York Judge Jed Rakoff in July ordered Bank of America to pay the $1.27 billion in civil penalties and Mairone to pay a penalty of $1 million, after he found “ample” evidence of a “fraudulent scheme” at Countrywide.
Bank of America and Mairone are now asking Rakoff for a judgment in their favor or a new trial.
A rejection by Rakoff would likely lead the bank to file an appeal. That’s because, when it announced its record settlement with the U.S. government, the bank said it planned to appeal the order that it pay penalties in the Hustle case.
The government had sought a Hustle fine of $2.1 billion from the bank. Rakoff imposed a lower amount based on a government expert’s testimony that most of the Hustle loans were not “materially” defective.
Bank of America has argued that it should not have to pay penalties in the case. The bank has said the most it can be fined is $1.1 million under the Financial Institutions Reform, Recovery and Enforcement Act.