The U.S. last year joined a whistle-blower action against Bank of America filed by former Countrywide executive Edward O’Donnell. The U.S. claims Bank of America and Countrywide, which the Charlotte, N.C.-based bank acquired in 2008, sold thousands of defective loans from 2007 to 2009 to the home-mortgage finance companies.
“This is a case about greed and lies,” assistant U.S. attorney Jaimie Nawaday told the jury today in Manhattan federal court. Countrywide was saying internally that the loans’ quality was “in the ditch” while at the same time selling them to Fannie Mae and Freddie Mac “for a quick profit,” she said.
The case is the first brought by the U.S. against a bank over defective mortgages to go to trial. Countrywide engaged in the fraud to boost profits, making at least $165 million, a lawyer for the government told the jury at the start of trial last month.
Government-sponsored entities such as Fannie Mae and Freddie Mac bought single-family mortgages from lenders. The U.S. alleges that to maintain revenue in a “cratering” market for subprime mortgages, a division of Countrywide initiated a loan program called “High Speed Swim Lane,” or “HSSL,” in August 2007.
O’Donnell testified during the trial that he warned other Countrywide executives about the failure rate of HSSL loans.
“The HSSL program was all about speed and volume and not about quality,” Nawaday said today. “Quality was no more than a distraction.”