Bank Of America To Face Suits Over Mortgage-Securities Fraud

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Bank Of America To Face Suits Over Mortgage-Securities Fraud

Bank of America Corp. failed to win dismissal of two government lawsuits in which it is alleged to have misled investors about the quality of loans tied to $850 million in residential mortgage-back securities. U.S. District Judge Max O. Cogburn Jr. in Charlotte, North Carolina ruled that the SEC properly laid out claims that Bank of America lied to investors about the projected health of the mortgages. Additionally, Cogburn found that the government had not properly stated its case in a similar action that bank documents omitted material facts and included false statements but gave the U.S. Justice Department thirty days to revise the suit. The bank attempted to have the suit dismissed but failed.

The SEC’s case claims that Bank of America committed securities fraud, while the Justice Department’s case alleges that the lender violated a rarely used law dating all the way back to the 1980s savings-and-loan crisis. Using this law the DOJ can punish actions too old to be covered by other laws and allows the government to seek higher damages. In March, a magistrate judge gave advisory opinions stating that the SEC’s case should go forward while the DOJ’s case should be dismissed. Cogburn, however, decided that both cases should proceed.

The complaints assert that Bank of America failed to tell investors in its preliminary documentation that most of the mortgages were acquired through wholesale markets that executives were deriding at the time. The SEC further accuses the bank of failing to file the flawed documents with the SEC. The bank argues that the buyers were sophisticated financial institutions, buying the securities around 2007 and 2008, months before the U.S. real estate market collapsed. None of the institutions ever sued the bank.

Both of these cases are part of an ongoing effort by the U.S. government to punish companies for actions it believes helped trigger the financial crisis. By itself, Bank of America has spent more than $50 billion resolving claims pertaining to inferior mortgages, many of which were tied to its 2008 purchase of Countrywide Financial Corp.

If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.

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