Prosecutors May Seek Larger Penalty For Countrywide Exec Behind “Hustle” Scam

Last fall, Bank of America and former Countrywide executive Rebecca Mairone were found liable in federal court over a Countrywide scam that had bilked bailed-out mortgage-backers Fannie Mae and Freddie Mac out of piles of cash by selling them worthless mortgages. Mairone was originally expected to face a $1.1 million penalty, but that was before she got a big bonus from her new gig.

While at Countrywide, Mairone was in charge of the High Speed Swim Lane program — better known as the “Hustle” — a plan that removed many of the roadblocks in the mortgage underwriting process that are intended to prevent lenders from issuing loans to borrowers who can’t repay. The notion, alleged prosecutors, was that Countrywide was trying to package up and sell as many loans as possible to Fannie and Freddie under the pretense that the mortgages had been through the normal underwriting procedure.

When nearly half of those loans turned toxic as the economy failed and homeowners were unable to repay, Fannie and Freddie took huge losses. The government subsequently sued under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which deals with the making of false statements to a federally insured financial institution.

Meanwhile, Mairone had long since fled the sinking Countrywide ship and somehow found work at JPMorgan Chase, where she was put in charge of — of all things — the bank’s foreclosure review department.

When it came time for the court to determine the penalty for Mairone, it initially set the $1.1 million figure based on her ability to pay. But then, according to the Wall Street Journal, she earned a $487,000 bonus from Chase, causing prosecutors to rethink how much she should have to pay.

The new figure could be as little as $1.2 million and as much as $1.6 million, which would effectively negate her bonus from Chase.