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

    Meet the deported nurse aiding asylum seekers at US-Mexico border

    Meet the deported nurse helping refugees at the border

    Francisco 'Panchito' Olachea drives a beat-up ambulance around Nogales, taking care of those trying to get to the US.

    The rise of Pakistan's 'burger' generation

    The rise of Pakistan's 'burger' generation

    How a homegrown burger joint pioneered a food revolution and decades later gave a young, politicised class its identity.

    'We will cut your throats': The anatomy of Greece's lynch mobs

    The brutality of Greece's racist lynch mobs

    With anti-migrant violence hitting a fever pitch, victims ask why Greek authorities have carried out so few arrests.