Bank of America to pay $864 million in compensation for losses over home loans

The US government is seeking $864 million in compensation from Bank of America for losses over home loans sold to it by the bank’s Countrywide Financial unit.

US attorney Preet Bharara made the request in documents filed late Friday in New York.

Bank of America was found liable for defrauding two US state-backed mortgage companies by a federal jury last month.

Countrywide Financial was acquired by Bank of America in 2008.

The ruling was a major win for the US government, which launched the case in the wake of the financial crisis.

Reports last month suggested that US banking giant JP Morgan is set for a record $13 billion fine to settle investigations into its mortgage-backed securities.

Wells Fargo agreed to pay $335 million to settle claims it misled investors over mortgage-backed bonds.

The US Department of Justice is investigating at least nine banks over their sales of mortgage-backed securities.

Countrywide Financial was found liable for selling thousands of defective loans to Fannie Mae and Freddie Mac.

The month-long trial focused on a Countrywide programme that was internally called “Hustle” or “high-speed swim lane” which allowed loans to be processed quickly without checking their quality.

The wrongdoing, which mostly took place before Countrywide was acquired, was discovered after a whistleblower filed a lawsuit against the firm.

The US economy witnessed a big boom in its housing market in the lead-up to the 2007-08 global financial crisis.

As house prices continued to rise, many banks looked to cash in on the boom by creating complex financial products that grouped together home loans.

However, a collapse in the housing market saw the value of those investments plummet as the underlying mortgage holders became unable to repay their debts.

This snowballed into the subprime crisis, which hurt investors globally and caused billions of dollars in losses.