October 2016 - Changing of the Guard

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TH E M R EP O RT | 63 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SECONDARY MARKET LOCAL EDITION Court Denies Government's Bid for New Trial in BOA 'Hustle' Case AN APPEALS COURT UPHOLDS ANOTHER APPEALS COURT'S OVERTURNING A $1.27 BILLION PENALTY AGAINST BANK OF AMERICAN REGARDING COUNTRYWIDE'S "HUSTLE" PROGRAM. NEW YORK // The 2nd Circuit U.S. Court of Appeals in New York denied the request of Manhattan U.S. Attorney Preet Bharara's office for a new trial of Bank of America for alleged mortgage fraud just before the crisis in 2008, according to a report from Reuters. In late May, a federal appeals court overturned a $1.27 billion penalty and a jury verdict against Bank of America which found the bank liable of mortgage fraud through Countrywide Loans' High Speed Swim Lane (HSSL, or "Hustle") program. Bank of America acquired Countrywide for $4 billion in 2008. In early August, Bharara's office asked a three-judge panel on the 2nd U.S. Circuit Court of Appeals in New York to grant a new trial in the case, arguing that the May decision that overturned the verdict "overlooked a wealth of evidence" which established that Bank of America committed fraud through the Hustle program. According to Reuters, the 2nd Circuit Court gave no reason for denying the request from Bharara's office for a new trial. Bharara's office originally filed suit against Bank of America in 2012 based on a complaint from whistleblower Edward O'Donnell. Late in 2013, a jury found Countrywide liable for selling toxic mortgage-backed securities to Fannie Mae and Freddie Mac through the Hustle program. In July 2014, a judge ordered Bank of America to pay a $1.27 billion civil penalty and also fined former Countrywide executive Rebecca Mairone $1 million for her alleged role. From the time the verdict and the penalty were issued, Bank of America fought to have both dismissed, claiming not only that the Hustle program ended prior to the bank's 2008 acquisition of Countrywide, but also that the government's accusations in the case amounted only to breach of contract and not fraud. On May 23, 2016, the 2nd Circuit Court over - turned both the jury's verdict and the judge's imposed penalty as well as the penalty against Mairone. Bank of America had no com - ment on the 2nd Circuit Court's decision not to grant a new trial. In May, at the time the Hustle verdict was dismissed, a bank spokesperson said, "We are pleased with the appellate court's decision." Mairone told MReport in May of the dismissal of the penalties, "I think it was a fair decision, and it was a long time coming. I'm relieved to finally be vindicated from the whole fraud issue. I couldn't be happier. It took a long time to get to this point, but you have to keep fighting for the right thing." Paid in Full: Chase Satisfies Settlement Obligation Early CHASE PAID $4 BILLION IN CONSUMER RELIEF TO FULFILL A 2013 SETTLEMENT REGARDING SALES OF TOXIC MORTGAGE- BACKED SECURITIES. NEW YORK // J PMorgan Chase has satisfied its $4 bil- lion consumer relief obligation under the terms of a November 2013 settlement over the sales of toxic residential mortgage-backed securities to investors leading up to the crisis, according to a re - port from Independent Monitor Joseph A. Smith, Jr., released in September. The report was the ninth and final report from Smith's office on the progress of Chase toward fulfilling its settlement obligation. In that report, Smith credited the bank with providing a total of more than $4.06 billion in consumer relief to 168,960 borrowers as of March 31, 2016. Chase paid off its settlement obligation a year and nine months early—under the terms of the settle - ment, the bank had until December 31, 2017, to pay it off. "Chase has satisfied its con- sumer relief obligation," said Smith. "The servicer has provided more than $4.06 billion to more than 168,000 borrowers before the dead - line specified in the settlement." The consumer relief was administered in three catego- ries—modification or forgiveness/ forbearance ($2.02 billion to 44,500 borrowers), rate reduction ($874 million to 34,700 borrowers), and low- to moderate-income (LMI) and disaster area lending ($1.17 billion to 89,700 borrowers). In the latter category, $476.5 million of the relief came in the form of lending to 41,400 first-time LMI homebuyers. "We are pleased to have ful - filled our requirements under the settlement," Chase said. "The $20 billion in consumer relief we've provided to customers over the last several years is part of our ongoing efforts to help families and communities that may be struggling." Chase settled with the govern - ment in November 2013 for a then- record $13 billion amid claims that the bank, along with Bear Stearns and Washington Mutual, sold faulty residential mortgage-backed securities to investors prior to the financial crisis. Chase was re - quired to make $9 billion in direct payments to government agencies and five states and provide $4 bil- lion in consumer relief under the settlement.

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