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Appellate Court Overturns $1.3 Billion Judgment Against Bank of America for Foreclosure Fraud

A major victory for the federal government was overturned in late May after the U.S. Second Circuit Court of Appeals in New York threw out a $1.3 billion judgment against Bank of America for its role in the housing crisis.

In 2014, Bank of America agreed to pay the largest federal settlement in American history to the Department of Justice after a lengthy investigation into the cause of the housing market collapse. The settlement came after a federal judge ordered the bank to pay $1.3 billion as a penalty for selling over 17,600 defective mortgage loans. Rather than face trial over thousands of additional mortgage loans, Bank of America decided to settle the case by paying the federal government over $16 billion. Under the terms of the settlement, Bank of America agreed to pay a $5 billion fine and $7 billion in relief to struggling homeowners.

The decision which ordered the $1.3 billion penalty and triggered the settlement was appealed to the Second Circuit. On review, a three-judge panel unanimously held that federal prosecutors had failed to prove that Countrywide, a division of Bank of America, had defrauded Fannie Mae and Freddie Mac, federal government-backed mortgage firms.

The decision stated that while Countrywide may have sold “low-quality” loans in 2007 and 2008, there was no evidence that the sales were part of a deliberate scheme of deception. These loans were part of Countrywide’s “High Speed Swim Lane” or “HSSL” loan origination program. The acronym caused the loans and program to be referred to as “Hustle” loans.

While the ruling is a setback for the DOJ, the $1.3 billion penalty is still only a fraction of what Bank of America paid to the federal government in fines and penalties. Since 2010, Bank of America has spent over $37 billion in legal fees, fines and penalties. After the 2014 ruling, Bank of America and several other large banks decided to avoid further litigation by settling their claims with the federal government and creating a national, multi-billion foreclosure relief fund.

It is unknown yet if the federal government will appeal the decision to the full panel of the Second Circuit Court of Appeals or to the United States Supreme Court. Regardless of whether the decision is appealed, the foreclosure relief programs created in the wake of the initial 2014 ruling should not be affected. Homeowners who need help fighting foreclosure can still apply to multiple state and federal programs to seek relief.

If you are facing foreclosure, you need to act quickly to protect your home. At Loan Lawyers, our attorneys can review your case and help you qualify for several homeowner relief programs. If you are currently in a foreclosure case, our lawyers can defend you in court or help you file a bankruptcy to save your home. For more information about your legal rights and options in a foreclosure, schedule your free, no-risk consultation at Loan Lawyers today by calling (888) FIGHT-13 (344-4813).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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