U.S. seeks larger penalty from Bank of America in 'Hustle' case

The U.S. government is increasing the penalties it is seeking from Bank of America after a jury found its Countrywide unit guilty of knowingly selling bad home loans to Fannie Mae and Freddie Mac, Bloomberg reports.

The government, which initially sought $864 million, now says the Charlotte-based bank should pay the maximum penalty of $2.1 billion in the so-called "Hustle" case.

In October, a jury in the civil case found Countrywide Financial Corp. and former executive Rebecca Mairone guilty of fraud over defective mortgages generated by the Hustle process, which the government said handled loans at a high speed and without regard for quality.

U.S. District Judge Jed Rakoff in Manhattan has yet to decide what the penalty should be in the first mortgage-fraud case brought by the U.S. to go trial, Bloomberg reports.

“To punish defendants for their culpability and bad faith, and to deter financial institutions and their executives who would engage in similar fraudulent mortgage schemes, the court should impose the maximum penalty on the bank,” the government said in the filing late Wednesday.

The bank has said it should not have to pay penalties in the case. It also has said the most it can be fined is $1.1 million under the Financial Institutions Reform, Recovery and Enforcement Act. The bank has pointed out that the Hustle process ended before it acquired Countrywide in 2008.

“This claim bears no relation to the limited Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company," bank spokesman Lawrence Grayson said Thursday. "We will present the relevant facts in a detailed response soon.”