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
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).