Bloomberg News

Ex-Countrywide Executive Denies Scheme to Mislead Loan Buyers

October 15, 2013

A former executive of Bank of America Corp. (BAC:US)’s Countrywide unit testified she wasn’t part of a scheme to defraud Fannie Mae and Freddie Mac (FMCC:US) by selling them thousands of defective loans.

The U.S. sued Bank of America in October, joining a whistle-blower action filed by another former Countrywide executive, Edward O’Donnell. The U.S. claims Bank of America and Countrywide, which the Charlotte, North Carolina-based bank acquired in 2008, sold thousands of defective loans from 2007 to 2009 to the home-mortgage finance companies.

“There was no scheme,” Rebecca Mairone, 46, a defendant in the government’s suit against Bank of America, testified today in Manhattan federal court.

The case is the first brought by the U.S. against a bank over defective mortgages to go to trial. Mairone, the only individual named as a defendant in the case, testified in response to questioning by her lawyer, Marc Mukasey. Mairone said she now works for JPMorgan Chase & Co. (JPM:US)

Countrywide engaged in the fraud to boost profits, making at least $165 million, Assistant U.S. Attorney Pierre Armand told jurors in his opening statements Sept. 24.

Brendan Sullivan, a lawyer for Countrywide, told the jury in his opening statement that while the U.S. claims the loans were faulty, the bank had created a process to speed the approval process of prime loans after it shifted focus away from subprime loans. He said no one at Countrywide had made misrepresentations to Fannie Mae (FNMA:US) or Freddie Mac.

Swim Lane

Government-sponsored entities such as Fannie Mae and Freddie Mac bought single-family mortgages from lenders. The U.S. alleges that to maintain revenue in a “cratering” market for subprime mortgages, a division of Countrywide initiated a loan program called “High Speed Swim Lane” or “HSSL” in August 2007.

O’Donnell testified that he warned Mairone and other Countrywide executives about the failure rate of HSSL loans.

Mairone testified today that Countrywide considered the risks before instituting HSSL and came up with plans to deal with them.

“I felt like we had the proper planning in place in case something went wrong,” she said.

The case is U.S. v. Countrywide Financial Corp., 1:12-cv-01422, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at

To contact the editor responsible for this story: Michael Hytha at

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Companies Mentioned

  • BAC
    (Bank of America Corp)
    • $17.42 USD
    • 0.16
    • 0.92%
  • FMCC
    (Federal Home Loan Mortgage Corp)
    • $2.25 USD
    • 0.07
    • 3.11%
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