California Real Estate Fraud Report

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08
Aug

Bank of America Sued by US Justice Department and SEC for Investor Fraud

The U.S. Justice Department and the U.S. Securities and Exchange Commission have both filed lawsuits against Bank of America, accusing the lending giant of defrauding investors in its sale to them of $850 million of MBS (mortgage-backed securities). The lawsuits were filed in the U.S. District Court in Charlotte, North Carolina and accuse the bank of making intentionally misleading statements about the MBS pool as well as failing to disclose material facts about the residential mortgages underlying the bundled securities, dating back to 2008.

The two legal actions are entirely new and separate from the lawsuit filed against Bank of America when it acquired Merrill Lynch and Countrywide Financial, which it settled for $45 billion.

The investors left with the losses were the Federal Home Loan Bank of San Francisco and Wachovia Bank National Association.

Charlotte, NC-based Bank of America responded to the lawsuits by stating: “These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that. 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.”

In October 2012, the U.S. Attorney’s Office in Manhattan sued Bank of America over losses that Fannie Mae and Freddie Mac shouldered on loans the government claimed were deficient.

Read the original article in Reuters.

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