Bank of America Corp. on Wednesday said it shouldn't have to pay
a $1.27 billion penalty over an old mortgage program known as the
Hustle.
In an appeal filed in the Second U.S. Circuit Court of Appeals,
the bank said it hadn't been allowed to present key evidence in the
Hustle trial, making it impossible "to offer a meaningful
defense."
The bank said the court didn't allow it to present evidence that
the Hustle loans were of "at least as high quality as other loans."
The bank also complained that the court had excluded testimony from
witnesses who believed that the loan program in question "was
proper and produced good-quality loans."
"From beginning to end, what took place in this case was not
only unfair, but utterly unprecedented," the bank wrote.
The Hustle case revolves around a civil lawsuit that the U.S.
Attorney's Office of Manhattan filed against Bank of America in
2012. It alleged that a pre-crisis Countrywide Financial Corp.
program called Hustle had churned out shoddy mortgages with a focus
on quantity, not quality, and then misrepresented those loans when
selling them to Fannie Mae and Freddie Mac, which had to be propped
up by government money in the financial crisis.
Bank of America purchased Countrywide in 2008.
The bank and the Justice Department went to trial over the
Hustle allegations, rather than settling the case. A jury found the
bank liable for fraud in 2013.
The bank's filing Wednesday also said the government had
overreached in suing the bank. The lawsuit relied on a provision
called the Financial Institutions Reform, Recovery and Enforcement
Act, or Firrea, which allows the government to prosecute fraudulent
conduct "affecting a federally insured financial institution." The
bank said the Justice Department applied Firrea in a way that was
never intended--by saying that the bank's conduct was "affecting"
itself--in other words, making the bank both victim and
perpetrator.
Bank of America has also contended that the Hustle program was
shuttered by the time it bought Countrywide. It has also said it
lost money on the loans in question.
Write to Christina Rexrode at christina.rexrode@wsj.com
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