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Bank Of America Sold $850M In 'Toxic Waste' Mortgage Securities

The SEC and Department of Justice filed a civil suit today against BofA claiming the bank defrauded investors when it sold mortgage securities backed by more than $855 million in residential mortgages. Bank of America entities in 2008 sold the RMBS (residential mortgage backed securities) and told investors they were backed by high quality, prime mortgage loans. The suit says an “unprecedented portion” of the mortgage loans had been originated through mortgage brokers unaffiliated with the Bank of America Entities through a so-called wholesale channel. By the time BofA was selling the securities in 2008 the wholesale loans were being dubbed by then CEO Ken Lewis as “toxic waste,” according to the DoJ suit. Bank of America disagrees with the suit’s assessment of the quality of the loans. The SEC is also considering charges related to charges against Merrill Lynch arising from its CDO investigation.

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