Appeals court reverses fraud finding against Bank of America

A federal appeals court on Monday overturned a jury’s finding that Bank of America was liable for fraud over mortgages made in a Countrywide Financial program nicknamed “Hustle.”

The 2nd U.S. Circuit Court of Appeals in New York City ruled Monday also threw out a more than $1.2 billion penalty imposed after trial.

The court said there was insufficient evidence that mail and wire fraud was committed by the Charlotte-based bank’s Countrywide Financial unit in late 2007 and 2008.

Bank of America acquired former subprime mortgage lender Countrywide Financial in 2008, leading to billions of dollars in losses for the bank from legal settlements, penalties and bad loans. The case ruled on Monday was one of the last major crisis-era lawsuits still lingering for the bank, which has been working to put its legal troubles behind it.

A jury in October 2013 had found the bank liable after the government said Countrywide lied about the quality of mortgages it passed along to financial firms Fannie Mae and Freddie Mac. In July 2015, Judge Jed Rakoff in Manhattan ordered the bank to pay $1.27 billion in civil penalties.

The jury had also ruled against a former Countrywide executive, Rebecca Mairone, who had also appealed the decision. She had been ordered to pay $1 million in civil penalties.

In its decision Monday, the appeals court said “the trial record reveals a basic deficiency in proof under the statutes, and accordingly, we conclude the evidence is insufficient to sustain the jury’s verdict.”

Prosecutors had no immediate comment. A bank spokesman could not be immediately reached. The Associated Press and staff writer Deon Roberts contributed.