US sues Bank of America over securities fraud

Justice Department files civil lawsuits against Bank of America for mortgage-backed securities fraud of more than $850m.

    US sues Bank of America over securities fraud
    Bank of America warned on Thursday about possible new civil charges linked to a sale of bonds [AP]

    The US government has filed two civil lawsuits against Bank of America for what the Justice Department and securities regulators said was a fraud on investors involving $850m of residential mortgage-backed securities.

    The government filed the suits on Tuesday in the US District Court in Charlotte, North Carolina, the Justice Department said in a statement.

    The securities date to about January 2008, the government said, putting them just at the beginning of the global financial crisis.

    Bank of America responded to the lawsuits with a statement: "These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that.

    We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result.

    Statement from Bank of America

    "The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions. We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

    Bank of America had warned in a securities filing on Thursday about possible new civil charges linked to a sale of one or two mortgage bonds.

    'Misstatements and omissions'

    The two suits accuse Bank of America of making misleading statements and failing to disclose important facts about the mortgages underlying a securitisation named BOAMS 2008-A.

    "These misstatements and omissions concerned the quality and safety of the mortgages collateralising the BOAMS 2008-A securitisation, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected," the Justice Department said in its statement.

    A "material number" of mortgages in the pool "failed to materially adhere to Bank of America's underwriting standards," the statement said.

    Bank of America has announced a series of settlements with investors and the US government, including an $8.5bn settlement with investors in mortgage-backed securities and a $1.6bn deal with bond insurer MBIA Inc.

    SOURCE: Reuters


    YOU MIGHT ALSO LIKE

    Double standards: 'Why aren't we all with Somalia?'

    Double standards: 'Why aren't we all with Somalia?'

    Almost 300 people died in Mogadishu but some are asking why there was less news coverage and sympathy on social media.

    How Moscow lost Riyadh in 1938

    How Moscow lost Riyadh in 1938

    Russian-Saudi relations could be very different today, if Stalin hadn't killed the Soviet ambassador to Saudi Arabia.

    Kobe Steel: A scandal made in Japan

    Kobe Steel: A scandal made in Japan

    Japan's third-largest steelmaker has admitted it faked data on parts used in cars, planes and trains.