Former Countrywide Financial Executive will Collect $57 in Mortgage Whistleblower Case

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Former Countrywide Financial Executive Collects $57 million.

Former Countrywide Financial Executive Collects $57 million.

A former Countrywide Financial Corp. executive is set to receive $57 million for a whistleblower case against the firm.

The former executive’s testimony led a jury to find parent company Bank of America Corp. liable in July for fraud over slapdash mortgages the company sold. The current case involves allegations that Countrywide defrauded government-backed mortgage finance companies Fannie Mae and Freddie Mac by selling them loans that were not as substantial as the firm represented them to be. The process Countrywide used to sell the loans was technically referred to as “HSSL” (High Speed Swim Lane), earning the case the nickname the “Hustle.” In July, a New York federal judge ordered Bank of America to pay a penalty of $1.27 billion in connection with that case. The bank is currently appealing that decision, according to Reuters.

Bank of America acquired Countrywide Financial in 2008 for $4 billion, but it has spent much more in litigation, loan buybacks and write-downs related to the acquisition, Reuters wrote.

Newly released documents viewed by Reuters show the former executive filed a second suit against another Countrywide unit in June accusing the company of defrauding Fannie Mae and Freddie Mac by selling them subpar home loans. Bank of America paid $350 million to settle the allegations. The agreement was part of a larger $17 billion agreement the bank reached in August to settle claims concerning mortgages it bundled and sold in the interim to the financial crisis.

The former executive said he contacted federal authorities and filed the suit after learning the government might settle with Countrywide. He first contacted the office of Manhattan U.S. Attorney Preet Bharara in February 2012 after learning that the U.S. Justice Department was considering settling with large American banks accused of selling bogus mortgages to government-sponsored enterprises, according to Bloomberg News.

Under the False Claims Act, whistleblowers can collect anywhere from 15 to 25 percent of any recoveries. The False Claims portion of the Hustle case was dismissed by a federal judge, so the former executive was expected to receive no more than $1.6 million from the case; however, new documents obtained by Reuters show the former executive will collect 16 percent of the settlement, plus an additional $1.6 million.