Bank of America expects civil charges over mortgage bonds
The Justice Department intends to file civil charges against Bank of America Corp (BAC.N) linked to a sale of one or two mortgage bonds, the bank said on Thursday in a regulatory filing.
The Securities and Exchange Commission may also file civil charges for one of those bonds, the bank said. Both cases relate to mortgages that were too big to be guaranteed by Fannie Mae or Freddie Mac, but were packaged into “jumbo” mortgage bonds.
The filing did not specify what the cases were about. A Bank of America spokesman did not immediately return a call seeking comment.
The new charges, disclosed in a quarterly filing, underscore the extent of the second-largest U.S. bank’s hangover from the financial crisis. Bank of America has announced a series of settlements with investors and the U.S. government, including an $8.5 billion settlement with investors in mortgage-backed securities and a $1.6 billion deal with bond insurer MBIA Inc (MBI.N).
Staff at the New York Attorney General’s office said they intend to recommend filing an action against the bank’s Merrill Lynch unit from their mortgage bond investigation, the bank said in the filing.
The SEC is also considering civil charges against Merrill Lynch linked to repackaged debt securities known as collateralized debt obligations, the filing said.
Many of Bank of America’s headaches, including the $8.5 billion settlement, arise from its disastrous 2008 acquisition of Countrywide Financial Corp, a mortgage lender it bought at the height of the housing crisis for $2.5 billion. Analysts estimate the bank has lost more than $40 billion from bad loans, litigation and settlements linked to the purchase.
(Reporting by Dan Wilchins in New York; Editing by Peter Rudegeair and Lisa Shumaker)
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