Bank of America Sued $10 Billion in Alleged Mortgage Fraud
American International Group (AIG) sued Bank of America Corp. (BoA) for over $10 billion in an alleged “massive fraud” on mortgage debts on Monday.
AIG argues that it lost over $10 billion on about 350 residential mortgage-banked securities that the company bought from Merrill Lynch and Countrywide, Bank of America subsidiaries, between 2005 and 2007 for $28 billion dollars.
American International Group claims that BoA overstated the value of the $28 billion dollar mortgage investment and packaged securities that were supported by “hundreds of thousands of defective mortgages,” reported the lawsuit filed in New York Supreme Court.
Get Our Latest News for FREE
The suit alleges that Bank of America and its branches inflated home appraisals, let borrowers falsify their income, disregarded internal warnings about discreditable underwriting, and chose the riskiest mortgages for securitization.
“Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold. Now that it is clear that those representations were false, Bank of America must be held to account,” said AIG spokesman Mark Herr.
This suit is one of the biggest of its kind filed by an investor, due to the quantity of AIG’s losses, since the housing bubble.
Bank of America rejected AIG’s allegations and BoA spokeswoman Lawrence Di Rita said AIG is “the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors.”
Di Rita added, “AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets.”
Herr responded that Bank of America was trying “to blame others for its own misconduct.”
The lawsuit claims that a review of 262,322 mortgages, just a sample of the loans that were collected in the purchased mortgage securities, showed 40 percent of the loans breached the underwriting standards defined by Bank of America when it sold the securities.
On Sunday, AIG also filed a motion in an effort to block the $8.5 billion settlement between Bank of America and Bank of New York Mellon, which acted as executor on dozens of BoA mortgage securities.
On Monday, stock shares for Bank of America fell 22.8 percent, the lowest that the largest U.S. bank has seen since March 2009. The bank lost about one-third of its market value, or $32 billion over the last three days.
