The U.S. asked a federal appeals court to reconsider its May decision to toss out an almost $1.3 billion judgment against Bank of America Corp.’s Countrywide Financial unit, claiming the panel overlooked “a wealth of evidence.”
The government won the award after a 2013 trial at which jurors found the company defrauded mortgage-lending financiers Freddie Mac and Fannie Mae by selling them thousands of defective loans. The petition was filed Thursday at the U.S. Court of Appeals in New York.
U.S. lawyers had alleged that Countrywide generated thousands of defective loans and sold them to the two home- mortgage finance companies. Countrywide sold the loans to boost revenue in the tightening credit market in mid-2007, according to evidence presented by the U.S. at trial. The program called the “High Speed Swim Lane,” or the “Hustle” ran until 2008.
On appeal, bank lawyers argued the evidence produced at trial by the U.S. had failed to prove its case. The three-judge appellate panel agreed, saying the government’s proof didn’t sustain the alleged intent to commit fraud. The judges also threw out a $1 million penalty against a Countrywide executive who oversaw the “Hustle.”
“In reversing the jury’s verdict, the Court overlooked a wealth of evidence presented at trial that defendants made fraudulent misrepresentations at the time each loan was sold,” according to the filing by Manhattan U.S. Attorney Preet Bharara.
Countrywide, then based in Calabasas, California, was once the biggest U.S. 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. Bank of America acquired the company in 2008.
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based lender, declined to comment on the filing.
The case is U.S. v. Countrywide Home Loans Inc., 15-496, U.S. Court of Appeals, Second Circuit (New York).