Restitution For Bank of America In Mortgage Fraud Prosecution Improper

Bank of America is not entitled to restitution as a “victim” under the Mandatory Victims Restitution Act for bad loans issued during the 2007-2008 housing crash, the U.S. Court of Appeals for the Seventh Circuit recently held. See United States v. Litos, 847 F.3d 906 (7th Cir. 2017). Three defendants were ordered to pay $893,015 in restitution to Bank of America for their involvement in a bank fraud prosecution surrounding fraudulent mortgage applications. In spite of the bank’s reckless conduct surrounding the loans, the court-ordered restitution.

The Seventh Circuit reversed.

“We are mindful that the federal criminal code requires ‘mandatory restitution to victims of certain crimes, 18 U.S.C.  3663A (the Mandatory Victim Restitution Act of 1996, usually referred to as the MVRA), including fraud, see  3663A(c)(1)(A)(ii), but only for ‘an offense resulting in damage to or loss or destruction of property of a victim of the offense.’ 3663A(b)(1). That doesn't seem to describe the loss suffered by Bank of America as a result of its improvident loans, especially when we consider its complicity in the loss—its reckless decision to make the loans without verifying the solvency of the would-be borrowers, despite the palpable risk involved in, for example, providing mortgage loans to a person who applies for six mortgages in ten days.”

The court continued that:

“Had the bank done any investigating at all, rather than accept at face value obviously questionable claims that the mortgagors were solvent, it would have discovered that none of them could make the required down payments, let alone pay back the mortgages. These people were just fronts for the defendants, who made the down payments required by the bank, pocketed the mortgage loans (which were of course much larger than the down payments) that the bank made, and left it to the nominal mortgagors to default since they hadn't the resources to repay the bank. All this was transparent.”

Accordingly, the court concluded that Bank of America was not a “victim” for restitution purposes.

The court of appeals, however, did encourage the district court to assess on remand whether the defendants should be fined in an equal amount to the restitution that had been previously ordered.

The case was remanded for resentencing.

About Brandon Sample

Brandon Sample is an attorney, author, and criminal justice reform activist. Brandon’s law practice is focused on federal criminal defense, federal appeals, federal post-conviction relief, federal civil rights litigation, federal administrative law, and the Freedom of Information Act (FOIA).

Leave a Comment

Recommended for you

Federal Halfway House – Everything You Need To Know

Over the past several weeks, I have received numerous e-mails and calls from different individuals concerning federal halfway house placements that have been reduced significantly—or denied entirely—by the Federal Bureau of Prisons (“BOP”). What is going on? A variety of things, it seems. I.  Federal Halfway House – A Brief Overview The BOP has long…

Read More

The First Step Act Bill Summary Explained : A Comprehensive Analysis

The First Step Act 2018 Bill Summary: On December 21, 2018, the President signed into law The First Step Act 2018, a bipartisan effort to reform the federal criminal justice system. The Law Office of Brandon Sample has assembled this detailed analysis of the First Step Act 2018 to help the public understand the ins…

Read More

Sentencing Reform And Federal Prison News – January 2018

We are a week into 2018 and there is much buzz about what lies ahead in the year from the courts, Congress, and the U.S. Sentencing Commission for federal prison and sentencing reform. Here’s a summary of some of the highlights. (a) Congress – Sentencing Reform Different bills remain under consideration, but none have yet…

Read More