Bank of America Corp ( BAC ), the second-largest bank in the U.S., continues to hog the limelight, thanks to several litigations and legal issues that it has trapped itself in. The major regional bank had appealed against the court verdict that charged a penalty of $1.27 billion on it for selling dubious loans to Fannie Mae ( FNMA ) and Freddie Mac ( FMCC ) prior to the financial crisis.
Reuters reported that the U.S. government, after having failed to find any logic in BofA's appeal, wants it to be rejected.
Notably, the penalty was levied by the U.S. District Judge Jed Rakoff at Manhattan in July. The Federal prosecutors charged the bank's Countrywide unit for creating the program 'high-speed swim lane' (HSSL) or 'Hustle', which rewarded employees for the quantity rather than quality of loans (read more: BofA Fined $1.3B for 'Hustle' Fraud, May Appeal ).
The U.S. Department of Justice claimed that there is enough evidence to substantiate that Countrywide deceived the government-controlled mortgage companies regarding the quality of loans being sold, as it focused more on speed and volume instead of quality.
We believe that though BofA has successfully settled some cases pertaining to Countrywide in the past, the current spate of litigations has tarnished the bank's reputation to a greater degree.
Presently, BofA carries a Zacks Rank #4 (Sell). A better-ranked major regional bank is JPMorgan Chase & Co. ( JPM ), holding a Zacks Rank #2 (Buy).