While the federal government has worked to fine Bank of America (BoA) for shoddy mortgages made by its Countrywide unit prior to the 2008 economic crisis, a federal appeals court found in favor of the lender. This ruling has overturned the bank's penalty fee of $1.27 billion that they had previously been directed to pay.
The ruling was made by the three judges who sit on the United States Court of Appeals for the Second Circuit and follows BoA's appeal of a 2014 decision. That decision was made by Federal District Court Judge Jed S. Rakoff and ordered BoA to pay the penalty.
Many of the shoddy mortgages were not made by BoA directly, but went through Countrywide, a mortgage company the lender purchased in 2008. In addition to BoA, the case also named former Countrywide executive Rebecca Mairone, who was ordered to pay a $1 million dollar penalty. That fine was also overturned by the Second Circuit's ruling.
The three judges on the appeals court ruled that federal prosecutors did not provide enough proof that Countrywide had defrauded Freddie Mac and Fannie Mae by selling them mortgages that were in danger of being defaulted upon. While the panel did say that Countrywide executives may have not been as truthful about the quality of the mortgages they were selling to the mortgage firms in 2007-2008, the evidence was not sufficient to prove that Countrywide was being deliberately deceptive.