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Bank of America Sued By U.S. Government

Syuzanna Petrosyan |
August 7, 2013 | 9:41 a.m. PDT

Executive Producer

(Creative Commons)
(Creative Commons)
The U.S. government is suing Bank of America for investor fraud over the sale of $850m worth of residential mortgage-backed securities. 

The lawsuit comes at a time when Bank of America is trying to persuade its investors that its legal troubles are in the past. 

The U.S. Justice Department and the U.S. Securities and Exchange Commission filed parallel lawsuits in U.S. district court in Charlotte, North Carolina. They accuse the bank of misleading statements and failing to disclose important information regarding the pool of mortgages underlying a sale of securities to investor in 2008. 

For example, the bank didn't tell investors that 22% of the homeowners were self-employed and that 70% of those didn't have their income validated by the bank, the complaint alleges.

One employee told the government that she was told to "keep her opinions to herself" when processing loan applications. 

SEE ALSO: Bank Of America Subsidiary Defrauded Borrowers, Leaked E-mails Suggest

Bank of America responded to the lawsuit in a statement from Charlotte: "These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that…We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

Bank of America shares fell 1.1% to close at $14.64 on the New York Stock Exchange following news of the lawsuits.

In 2011 Bank of America's shares fell more than 20% in a single day after American International Group filed a $10bn lawsuit accusing the bank of mortgage fraud.

This latest lawsuit against the second-largest bank in the U.S. adds to the disputes stemming from the 2008 financial crisis. Bank of America has already agreed to pay in excess of $45bn to settle those disputes. 

The US attorney general, Eric Holder, said on Tuesday that 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." 


Reach Executive Producer Syuzanna Petrosyan hereFollow her on Twitter.  



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