Jury Rules against Countrywide, in Whistleblower Suit

A federal grand jury found the former CountrywidernFinancial and one of its executives guilty of mortgage fraud on Wednesday in arnwhistle-blower generated civil suit.  Therncompany, acquired by Bank of America in 2008, was found liable for actions thatrnresulted in the purchase of thousands of defective loans by governmentrnsponsored enterprises (GSEs) Fannie Mae and Freddie Mac.  Former Countrywide executive Rebecca Maironernwas also found liable in the case.</p

Mairone had been chief operating officerrnof Countrywide’s Full Spectrum Lending Division which was responsible forrnoperating a program, implemented in 2007, called High-Speed Swim Lane, and<bnicknamed "the Hustle."  The program wasrndesigned to speed mortgage processing but federal prosecutors said it lackedrnquality checkpoints and processes such as income verification.  The loans were then sold to or guaranteed byrnthe GSE’s under representations that they met the companies underwritingrnguidelines. Mairone was the only Countrywide official named in the suit.</p

The government maintained that the 28,800rnloans underwritten through the Hustle program were processed in as few as 10rndays rather than up to 60 as in most programs. rnThe loans that ultimately defaulted cost the GSEs $131 million and theyrnallege that Countrywide earned at least $165 million under the program.  </p

A whistleblower brought the originalrnsuit against Mairone and her former employer; it was then joined by thernDepartment of Justice.  Edward O’Donnell,rnalso a former executive at the company, said he had complained repeatedly aboutrnloan quality standards used in the program. rnHe could be awarded as much $1.6 million for his role in the legalrnaction.</p

Countrywide’s defense attorney BrendonrnSullivan told jurors that only about 11,000 loans were processed through thernprogram which only lasted a few months and that there was no fraud involved.  </p

Judge Jed Rakoff told attorneys he would determine the civil penalties inrnthe case.  The Justice Department hasrnrequested payment of either that gross losses suffered by the GSEs, $848rnmillion, or alternatively the estimated net loss of $131 million.  </p

Attorneys for both Mairone and Bank ofrnAmerica which is responsible for Countrywide’s liabilities indicated they mayrnappeal the decision.

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