Bank of America Sued – Again

by on Bank of America Foreclosures

Bank of America Sued Again

Of all of the banks within the United States that have been part of the foreclosure settlement agreements, Bank of America has been in the spotlight more than any other lender. In fact, the bank cannot seem to stay out of the news lately.

Despite its other massive lawsuits, Bank of America has continued to do rather well – exceeding profit expectations amidst the chaos.

This big bank, that many claims is too big to fail, is being sued again – this time by the federal government.

United States Sues Bank of America

The United States Department of Justice filed a civil lawsuit against Bank of America earlier this week for intentionally misleading investors. Specifically, the bank is being accused of lying to investors who purchased mortgage-backed securities by misleading them about the quality of the loans involved in the bonds that these investors were purchasing from the bank.

There is no doubt that actions of major lenders – Bank of America included – led to the financial crash. However, this lawsuit is designed to penalize the bank for its lack of honesty and the resulting loss for investors who purchased these mortgage-backed securities.

Specifically, this lawsuit is related to a 2008 purchase where investors spent $850 million on these “high-quality” securities from Bank of America. As a result of the deceit, these investors will ultimately lose around $100 million. So far, 23% of the mortgages involved in this transaction have failed – something that the Department of Justice (and the investors) are claiming Bank of America knew would happen but failed to reveal.

In short, Bank of America failed to reveal pertinent information about the loans involved in the transaction and as a result led investors down a road that would lead to losses.

Bank of America’s response to the lawsuit is essentially that they are “not responsible for the housing market collapse” and as a result are not responsible for the failure of these loans in that situation – claiming that the loans in question actually performed better than other similar loans.

So far, Bank of America has already paid over $45 billion as a result of the settlements revolving around the housing market crash. It will be interested to see if this lawsuit increases that number, especially since the bank is being sued by the United States.

At the end of the day, Bank of America continues to be held to the fire for unethical actions and is now being sued by the U.S. government for failing to reveal pertinent facts about loans involved in a mortgage-backed securities transaction that ultimately will cost investors around $100 million in losses.

Image source: npr.org

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