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Bank of America Hit with Government Lawsuits Over Mortgages

Bank of America is back in the government's crosshairs.

money.cnn.com | August 7, 2013

By James O'Toole

The Department of Justice announced a civil lawsuit on Tuesday alleging that Bank of America defrauded buyers of mortgage-backed securities by lying about the quality of the home loans involved. The Securities and Exchange Commission also announced a parallel case.

Mortgage-backed securities are bonds created by packaging together and selling groups of residential mortgage loans. These securities played a key role in the 2008 financial crisis, failing in huge numbers as the housing market collapsed.

"Bank of America's reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors," Anne Tompkins, the U.S. Attorney in the Western District of North Carolina, said in a statement. "Now, Bank of America will have to face the consequences of its actions"

The allegations center on a specific offering from 2008 in which investors including Wachovia Bank and the Federal Home Loan Bank of San Francisco purchased over $850 million worth of supposedly high-quality mortgage-backed securities from Bank of America (BAC, Fortune 500).

The DOJ estimates that investors will ultimately lose more than $100 million on the offering. As of June, the Justice Department said, 23% of the mortgages involved had failed or were delinquent.

Bank spokesman Lawrence Grayson said Tuesday that the mortgages in question were "sold to sophisticated investors who had ample access to the underlying data," and that Bank of America would fight the charges.

"The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions," Grayson said.

"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 revealed the possibility of charges in its quarterly report last week. The firm has been forced to pay billions of dollars in legal costs related to the housing bust and the financial crisis over the past few years.

 

Back to August 2013 Archive

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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