The Department of Justice has made accusations against the Bank of America, and has announced a law suit against them. The Securities and Exchange Commission also announced another case. The government believes that the Bank of America has defrauded those individuals who bought securities backed by mortgages by telling them lies about home loans that were associated with the securities.
A mortgage backed security is just a bond that comprises a number of residential mortgages that are treated as a group, and so are bought or sold collectively. These securities contributed and paved way for the financial crisis that struck in the year 2008. The securities failed to a large extent and the housing market buckled and collapsed.
Anne Tompkins is an attorney in the North Carolina Western District. She stated that the Bank of America is reckless and betrays the nation through their practices. As such, the investors have always suffered significant losses. However, now time has turned its attention towards the bank, and they will have to go through harsh consequences because of their earlier frauds.
The allegations made against the Bank of America revolve around a situation that occurred in 2008 when several major investors that include the San Francisco’s Federal Home Loan Bank and the Wachovia Bank bought mortgage securities that were supposedly valued at $850 million or more from the Bank of America. According to the Justice Department, almost 23% of these mortgages have failed. Consequently, the investors will now have to face huge losses that can go beyond $100 million.
Lawrence Grayson, a representative from the bank, stated that the mortgages under discussion have been sold off to proficient investors who could have easily accessed the data associated with them and could have conducted a more thorough research. He went on to say that a particular mortgage group had made a better performance compared to loans characterized by similar features that were secured by other financial agencies during that same period. Grayson also said that the Bank of America was not at fault. The loans defaulted because the real estate market had to suffer a collapse, not because their quality was low.
Whatever the reason may be for the securities to fail, the Bank of America now has to pay several billions of dollars as legal costs.
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