Bank of America Corp. must face a trial next month in a lawsuit alleging the bank's Countrywide unit defrauded Fannie Mae and Freddie Mac by selling them billions of dollars in bad mortgages, a federal judge ruled.
U.S. District Judge Jed Rakoff in Manhattan issued a ruling today rejecting the bank's request to dismiss the case, putting it on track for a trial scheduled to begin Sept. 23.
"The court concludes that there remain genuine factual disputes that, on at least one or more of the government's theories, precludes the granting of summary judgment to any defendant," Rakoff said in a one-page order, saying he would file a full opinion at a later date.
The U.S. sued Bank of America in October, intervening in a whistle-blower action originally filed by a former Countrywide executive, Edward O'Donnell. The U.S. claimed Bank of America and Countrywide, which it acquired in 2008, sold thousands of defective loans from 2007 to 2009 to the home-mortgage finance companies.
The government alleged Countrywide engaged in a "host of irresponsible origination practices that prioritize funding speed and discourage scrutiny and quality into a singularly risky loan manufacturing process that pumped out large quantities of poor quality loans," according to a memorandum filed in July.
"This program ended before our purchase of Countrywide, as the government acknowledges," said Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America. "We believe there was no fraud."
The case is U.S. v. Countrywide Financial Corp., 12- cv-01422, U.S. District Court, Southern District of New York (Manhattan).