U.S. Justice Department Sues Bank of America
On Tuesday, the U.S. government filed two suits against Bank of America alleging an $850 million fraud against investors of mortgage-backed securities. The Justice Department and the Securities and Exchange Commission filed the charges, charging the bank with making misleading statements and failing to disclose important information about the sales back in early 2008, when the economic crumble began. “These were prime mortgages sold to sophisticated investors who had ample access to the underlying data, and we will demonstrate that,” Bank of America responded in a statement.
"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. More than 40 percent of the 1,191 mortgages in the securitization did not comply with the bank's underwriting standards, according to the complaint.
"These misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected," the Justice Department said in its statement.
Threats of costly mortgage litigation have been dogging Bank of America for years.
"It has been shown repeatedly that the origination process at Bank of America and its subsidiaries failed to live up to their own internal guidelines and the resulting loans did not reflect the way they were characterized to investors," said Donald Hawthorne, a partner at Axinn Veltrop & Harkrider LLP, who has represented monoline insurers and RMBS investors in suits against mortgage originators, including Countrywide, relating to mortgage securities.
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."
“This is the RMBS Working Group’s most recent legal enforcement targeting misconduct in the RMBS market, but it will not be our last,” said Associate Attorney General Tony West in a press release Tuesday. “Combating financial fraud is a top priority for the Department of Justice. By filing this lawsuit today, we reaffirm an important principle – that everyone must play by the same set of rules, and no institution is too big or too powerful to escape appropriate enforcement. It is also a testament to the cooperation and coordination among the Working Group’s members, as the Justice Department and the SEC brought to bear their collective expertise and resources to build these cases against Bank of America.”
“Bank of America’s reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors,” U.S. Attorney Tompkins said. “Now, Bank of America will have to face the consequences of its actions. We have made a commitment to the American people to hold financial institutions accountable for practices that violated the law and wreaked havoc on the financial system, and my office takes that commitment very seriously. Our investigation into Bank of America’s mortgage and securitization practices continues.”
“I applaud Attorney General Holder for taking this important step toward holding Bank of America accountable for packaging and selling toxic loans to investors and brokers, a key cause of the housing collapse that crashed our economy and still plagues communities to this day,” said New York Attorney General Eric Schneiderman. “As a Co-Chair of the Working Group, I look forward to further action to address the causes and consequences of the financial crisis. The housing crisis in New York is far from over, and actions like these are necessary to ensure that homeowners are protected from similar conduct by banks and lenders in the future.”
"By filing this lawsuit today, we reaffirm an important principle – that everyone must play by the same set of rules, and no institution is too big or too powerful to escape appropriate enforcement"
What, we're supposed to debate the definition of "appropriate"? It's a good thing the Attorney Generals are patting each other on the back, because no one else is going to do it.
The Big Bankers belong in jail, and any monies the DOJ collects should go to citizens whose homes were wrongly foreclosed upon. Period. Your pretty speeches are not enough, gentlemen. They never will be.