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Showing posts with label Bank of America. Show all posts
Showing posts with label Bank of America. Show all posts
U.S. accuses Bank of America
The U.S. government on Tuesday filed two civil lawsuits against Bank of America that accuse the bank of investor fraud in its sale of $850 million of residential mortgage-backed securities.
While most of the cases Bank of America has already confronted pertain to its acquisitions of brokerage Merrill Lynch and home lender Countrywide, the lawsuits filed on Tuesday pertain to mortgages the government said were originated, securitized and sold by Bank of America's legacy businesses.
The residential mortgage-backed securities at issue, known as RMBS, were of a higher credit quality than subprime mortgage bonds and date to about January 2008, the government said, months after many Wall Street banks first reported billions of dollars in write-downs on their holdings of subprime mortgage securities.
The Justice Department and the U.S. Securities and Exchange Commission filed parallel lawsuits in U.S. District Court in Charlotte, North Carolina, accusing Bank of America of making misleading statements and failing to disclose important facts about the pool of mortgages underlying a sale of securities to investors in early 2008.
The investors included the Federal Home Loan Bank of San Francisco and Wachovia Bank National Association, the Justice Department lawsuit said.
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.
According to the lawsuits, Bank of America made misleading statements and failed to disclose important facts about the mortgages underlying a securitization named BOAMS 2008-A. Threats of costly mortgage litigation have been dogging Bank of America for years.
In 2011, the bank's shares fell more than 20 percent in a single day after American International Group filed a $10 billion lawsuit accusing the bank of mortgage fraud.
Since then, Bank of America's stock has more than doubled as the bank has announced agreements to settle major disputes, and investors have regained confidence in its outlook.
The lawsuit signals the federal government's willingness to pursue litigation challenging banks securitizations and marketing practices even as the financial crisis recedes further into the past.
Attorney General Eric Holder said in a statement on Tuesday that President Barack Obama's Financial Fraud Enforcement Task Force, which brought the latest lawsuit against Bank of America, "will continue to take an aggressive approach to combatting financial fraud and uncovering abuses in the residential mortgage-backed securities market," and is pursuing "a range of additional investigations."
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Bank of America accused of misleading investors
Federal prosecutors announced a civil lawsuit Tuesday against Bank of America for allegedly failing to disclose risks and misleading investors in an of $850 million mortgage-bond deal offered in 2008.
The action filed in North Carolina also targeted Bank of America affiliates Merrill Lynch, Pierce, Fenner & Smith and Bank of Bank of America Mortgages Securities.
In a related lawsuit also filed there, the Securities and Exchange Commission alleged that more than 70% of the mortgages in the Bank of America offering originated with brokers unaffiliated with the giant bank. Both lawsuits focused on residential mortgage-backed securities — bonds backed by a pool of residential mortgage loans packaged together at varying levels of risk and sold to investors. Separately Tuesday, Swiss banking giant UBS agreed to pay nearly $50 million to settle allegations that it misled investors in a 2007 mortgage-bond deal that went bad as the U.S. real estate market imploded.
The SEC said Switzerland's largest bank agreed to the settlement after the bank kept $23.6 million in upfront payments it received while acquiring collateral for the deal without investors' knowledge.
UBS agreed to the settlement without admitting or denying SEC allegations that the bank had violated U.S. securities laws.
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