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Virginia reaches $63 million pact with 11 banks in mortgage bond fraud suit

reuters.com | January 24, 2016

By Suzanne Barlyn

A group of 11 banks agreed to pay more than $63 million to settle allegations that they misled the Commonwealth of Virginia and its retirement system about residential mortgage backed-securities, Attorney General Mark R. Herring said on Friday.

The banks, which include two Bank of America Corp units, Morgan Stanley and a unit of the Royal Bank of Scotland Group PLC, defrauded the state's retirement fund by selling it shoddy mortgage bonds in the run-up to the financial crisis, Virginia's attorney general said in a 2014 lawsuit.

None of banks admitted liability in the settlement, Herring said.

The $63 million pact is the largest non-health care-related sum ever obtained in a suit brought under a Virginia law aimed at curbing fraud against the commonwealth's taxpayers, Herring said in a statement.

In the lawsuit, Herring said an analysis showed nearly 40 percent of the mortgages that backed 220 securities purchased by Virginia's retirement fund were fraudulently represented as posing a lower risk of default than they actually did.

The fund, which bought the securities between 2004 and 2010, lost a total of $383 million when it was forced to sell the securities, the lawsuit said.

Herring had originally sought a total of $1.15 billion from the banks, or triple the commonwealth's damages, a penalty allowed under the law at issue.

Two Bank of America units will together pay $19.5 million, the largest share of the settlement, followed by a Royal Bank of Scotland Group PLC unit ($10 million), a Barclays PLC unit ($9 million) and Morgan Stanley ($6.9 million).

Other banks in the settlement include units of Credit Suisse AG, Goldman Sachs Group Inc, Deutsche Bank AG, HSBC Holdings plc,, JPMorgan Chase & Co. and UBS AG.

A spokesman for HSBC said the bank is pleased to have concluded the matter. Representatives for the other banks either declined comment or could not be immediately reached for comment.

(Reporting by Suzanne Barlyn; Editing by Dan Grebler and Alan Crosby)

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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