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Bank of America challenges US$1.3 billion mortgage verdict

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Bank of America Corp.'s Countrywide unit urged a federal appeals court to reverse a US$1.3 billion fraud verdict finding the company at fault for selling defective residential mortgage loans to Fannie Mae and Freddie Mac.

[NEW YORK] Bank of America Corp.'s Countrywide unit urged a federal appeals court to reverse a US$1.3 billion fraud verdict finding the company at fault for selling defective residential mortgage loans to Fannie Mae and Freddie Mac.

Bank of America told the US Court of Appeals in Manhattan that it was treated unfairly during trial by US District Judge Jed Rakoff, who imposed a penalty much larger than one originally sought by the government.

"The case should never have gone to trial," the bank said in a court filing.

Mr Rakoff also made comments after the trial questioning why the government hadn't sued executives other than Rebecca Mairone, Bank of America said.

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Around the same time he made the comment, Mr Rakoff described the bank's conduct as "brazen" and imposed an "unprecedented penalty," according to the filing.

The case was the first brought by the US to go to trial against a bank over defective mortgages. A federal jury in Manhattan in 2013 found Countrywide committed fraud by misrepresenting the quality of risky loans processed in 2007 and 2008 through its "High Speed Swim Lane", or HSSL, programme.

Lawyers for the government argued at trial that Countrywide issued defective mortgages then sold them to Fannie Mae and Freddie Mac through the program, which reduced the number of days spent processing loans to as little as 10 from what had once been as long as 60 days.

Bank of America argued Wednesday that Rakoff also improperly permitted the US to use a civil fraud statute against the bank, charging it with a crime that affects a federally insured financial institution.

Dawn Dearden, a spokeswoman for Manhattan US Attorney Preet Bharara, who brought the case, declined to comment on the bank's request.

Bloomberg

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