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Ex-Countrywide Exec Denies Fraud at BofA Trial over Mortgages

reuters.com | October 16, 2013

By Joseph Ax

Oct 15 (Reuters) - A former executive of Bank of America's Countrywide unit told a federal jury on Tuesday that she did not knowingly sell toxic mortgages to Fannie Mae and Freddie Mac in the run-up to the financial crisis.

Rebecca Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending Division, is the lone individual defendant in the lawsuit brought by the U.S. government against the bank, which acquired Countrywide in 2008.

The trial, now in its fourth week at the U.S. District Court in Manhattan, is centered on the government's allegations that Countrywide defrauded Fannie Mae and Freddie Mac, the government-sponsored mortgage finance companies, by selling them thousands of defective mortgages. Countrywide sped up approvals to unqualified lenders in a process it called the "High-Speed Swim Lane" (HSSL), or "Hustle."

Mairone, who oversaw the process, is one of only a handful of individual defendants in lawsuits the government has filed against major financial institutions over improper mortgage practices since the housing market meltdown. The Countrywide case is the first such case to reach trial.

At the start of Mairone's testimony, her lawyer, Marc Mukasey, asked a series of questions about whether she had deliberately sold substandard mortgages to Fannie and Freddie.

"No, never," she replied.

She said she believed HSSL would actually improve loan quality and that the company had controls in place to manage risks. Mairone, 46, is now a managing director at JPMorgan Chase & Co.

The case stems from a whistleblower lawsuit filed by former Countrywide executive Edward O'Donnell.

The government estimates the mortgage finance companies had a gross loss of $848.2 million on Countrywide's "Hustle" loans. The net loss on loans that were materially defective was $131.2 million, according to prosecutors.

The government has accused Mairone and Countrywide of trading quality for volume by removing underwriters from the review process and paying employees based on the number of loans they produced.

In several hours of testimony on Tuesday, Mairone said she and other Countrywide employees were deeply committed to making sure the loans they sold were low risk.

"Loan quality was the foundation of what we did every day," she said. "That was the culture."

She also emphasized that decisions about how to design and manage HSSL, as well as steps taken to remedy flaws, were not unilaterally made but were the product of discussions with several company leaders.

The case is U.S. ex rel. O'Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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