America sues Bank of America Corp (NYSE:BAC) over $850M misappropriation
On Tuesday, the U.S Justice department and the SEC filed separate lawsuits against Bank of America Corp (NYSE:BAC).The charges are that BAC traders willfully misled its investors about the quality of security backed by residential-mortgages that had been sold by the bank at the outset of the financial crisis in the country.
These are latest in the long line of lawsuits that have been filed by various factions against the 2nd largest bank in the country. Most of these lawsuits have stemmed from the nation’s housing crisis. BAC has repeatedly been accused of discriminating against its mortgage-applicants. It has ended up saddling the U.S government with troubled loans running into billions of dollars as well as a variety of foreclosure abuses.
The enormity of the misappropriation
Now, the allegation in the civil charges against the bank is that it hid the risks that were associated with $850M worth of securities that were backed by the home loans. Justice has claimed that BAC was aware that over 40% of the 1,191 mortgages that it had bundled into securities did not meet all the underwriting guidelines and that despite this fact, they were sold.
The prosecutors are estimating that he total amount of losses that investors will incur will be in excess of $100M. They have said that the exact amount of the civil penalties will be determined only as the litigation proceeds.
The latest lawsuits
In the wake of the financial crisis, BAC has been contending with a slew of lawsuits over residential foreclosures and mortgage securities. However, Tuesday’s lawsuits, are tied to the banks own mortgage operations. Prosecutors are saying that BAC made its employees churn-out mortgages and that they placed quantity over quality to garner profits.
According to the complaint, one bank employee even told the prosecutors that her superiors pressurized her to process numerous applications as speedily as possible and that she should keep her opinions to herself