Lawyers for Bank of America Corp.'s Countrywide unit and the U.S. government returned to a federal courtroom today to spar over whether the bank owes nothing—or as much as $2 billion—for selling thousands of defective mortgage loans to Fannie Mae and Freddie Mac.

A federal jury in New York in October found the unit of the Charlotte-based bank liable for defrauding the U.S.-sponsored enterprises in the first mortgage-fraud case brought by the government to go to trial. Today, U.S. District Judge Jed Rakoff is hearing arguments over the penalty.

Countrywide says it should pay nothing, or no more than $1.1 million, because the U.S. failed to prove that Fannie Mae and Freddie Mac lost money. U.S. lawyers say Countrywide should pay as much as $2 billion, reflecting revenue for selling defective loans. The government wants $1.1 million from former Countrywide executive Rebecca Mairone, who was also found liable.

Countrywide Financial Corp., then based in Calabasas, Calif., 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 Countrywide in 2008.

During last year's trial in Manhattan federal court, the U.S. said Countrywide committed a "simple but brazen" fraud by misrepresenting risky loans processed in 2007 and 2008 through its "High Speed Swim Lane," or HSSL, program as being of investment quality.

The case was brought by U.S. Attorney Preet Bharara in Manhattan under the Financial Institution Reform, Recovery and Enforcement Act of 1989, or FIRREA. The statute, enacted during the savings-and-loan crisis of the 1980s, allows the U.S. to sue an individual or group for fraud that affects a federally insured financial institution.

Bloomberg News