According to Bloomberg,
Nov. 10 (Bloomberg) — Bank of America Corp. should pay the maximum penalty of $863 million for selling defective loans to Fannie Mae and Freddie Mac (FMCC), given the egregiousness of the fraud, U.S. prosecutors told a federal judge.
Bank of America’s Countrywide unit was found liable by a jury in Manhattan federal court last month for selling the government-sponsored entities thousands of defective loans in the first mortgage-fraud case brought by the U.S. to go to trial.
The bank’s fraud was “simple but brazen,” prosecutors wrote in a court filing last night. “They made bad loans and they knowingly sold those bad loans as good loans to cheat Fannie Mae and Freddie Mac out of money.”
Given the measure of Countrywide’s culpability, the public injury and the bank’s ability to pay, the government said the maximum penalty under the law was warranted — the gross loss suffered by the entities under the scheme.
U.S. District Judge Jed Rakoff, who presided over the trial, told lawyers last month he would determine the amount of any penalty at a later date. Arguments in the matter are scheduled for Dec. 5.
The filing represents an increase over what the government said the gross losses were last month. At the time, Assistant U.S. Attorney Pierre Armand asked Rakoff to impose a penalty of $848 million. Armand also offered a more lenient option, telling Rakoff he could fine Countrywide about $131 million, the estimated net losses to the two entities.