Bank of America Corp urged a US federal judge to impose no penalty even after a jury found it liable for fraud over the sale of defective mortgages by its Countrywide Financial unit. The US Department of Justice is seeking $863.6 million of damages from the second-largest US bank over losses that government-controlled mortgage companies Fannie Mae and Freddie Mac incurred after buying the home loans in 2007 and 2008.
But in a court filing on Wednesday night, four weeks after the jury verdict in the civil case, Bank of America told US District Judge Jed Rakoff in Manhattan that under applicable law it should pay at most $1.1 million.
Investigators said a Countrywide process known as "Hustle," as well as "High Speed Swim Lane" and "HSSL," had rewarded employees for the quantity of loans produced and eliminated checkpoints meant to ensure that the mortgages were sound.
But Bank of America said the government could not show that Fannie Mae's and Freddie Mac's losses stemmed from alleged Countrywide misrepresentations "as opposed to other factors such as the world-wide mortgage crisis."
Bank of America, which bought Countrywide in July 2008, also took the government to task for seeming trying to punish it for defending itself at trial.
In its Nov. 8 request for penalties, the government said Bank of America "frequently defied both the evidence and common sense" at trial by insisting there was no proof of fraud.
"The government's argument is offensive, suggesting a defendant should be more severely punished when it dares to defend itself against allegations of fraud which it truly believed were baseless - and still does," Bank of America said. "The penalties in this matter should be zero."
The office of US Attorney Preet Bharara in Manhattan did not immediately respond on Thursday to a request for comment.
Former midlevel Countrywide executive Rebecca Mairone was also found liable for fraud at the same trial.
In another Wednesday court filing, lawyers for the single mother, who later joined J. P Morgan Chase & Co, called the US request that she be fined "excessive" and unnecessary.
"Ms. Mairone has already been severely punished, personally and professionally," her lawyers said. "Unjustly depicted in the media as the villainous face of the mortgage crisis and in professional limbo, Ms. Mairone is facing ruin, even as the full consequences of the verdict are not yet realised."