Date
20 August 2017
Bank of America used the fast-track mortgage scheme as a vehicle for brazen fraud, driven by hunger for profit, according to a US court ruling. Photo: Reuters
Bank of America used the fast-track mortgage scheme as a vehicle for brazen fraud, driven by hunger for profit, according to a US court ruling. Photo: Reuters

Bank of America fined US$1.3 bln for toxic mortgages

Bank of America (BofA) has been fined US$1.3 billion for selling toxic mortgages to Fannie Mae and Freddie Mac, the government-backed mortgage companies, the Financial Times reported Wednesday.

The decision by a United States judge came as the bank tried to negotiate a deal with the US justice department over separate allegations of mortgage fraud.

The two sides reached a settlement of US$13 billion to US$17 billion to resolve those claims, the report said, citing a person familiar with the matter.

In his ruling, judge Jed Rakoff criticised the actions at BofA’s Countrywide unit, which set up a scheme in 2007 to fast-track risky mortgages.

It was called high speed swim lane (HSSL) or Hustle.

The scheme lasted nine months but it was from start to finish “the vehicle for a brazen fraud by the defendants, driven by a hunger for profits,” Rakoff said.

BofA chose to fight the case rather than settle.

Countrywide was acquired by the North Carolina-based bank in 2008 but the mortgage lender produced huge writedowns after the housing market collapsed.

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