CHICAGO (CN) – The Seventh Circuit issued Bank of America a stinging rebuke, finding it should not recover $893,000 from three convicted fraudsters because its own reckless mortgage lending showed deliberate indifference to the risk of losing the money.

Minoas Litos and Adrian and Daniela Tartareanu were convicted of fraud for falsifying loan applications and financing the sale of their own properties to buyers in Gary, Ind. They walked away with the purchase price of the property, minus the amount of the down payment.

As required by federal law, the fraudsters were ordered to pay restitution to their victim – Bank of America – in the amount of $893,015, on the ground that they cheated the bank by pretending that the buyers were the source of the down-payment money.

On appeal, the Seventh Circuit vacated the restitution order Friday and condemned the bank’s pre-2008 financial crash lending practices.

Read on.