Bank of America Corp. failed to win dismissal of two government lawsuits in which it’s accused of misleading investors about the quality of loans tied to $850 million in residential mortgage-backed securities.
U.S. District Judge Max O. Cogburn Jr. in Charlotte, N.C., ruled Thursday that the U.S. Securities and Exchange Commission properly laid out claims that Bank of America lied to investors about the projected health of the mortgages.
Cogburn also gave the U.S. Justice Department 30 days to revise a parallel suit over the same securities after finding the government hadn’t properly stated its case that bank documents omitted key facts and included false statements. The bank argued that the suit should be dismissed.
“The court need not reach far outside the complaint or be an expert in economics to take notice that it was the trading of toxic RMBS between financial institutions that nearly brought down the banking system in 2008,” Cogburn said in his ruling in the Justice Department suit.
Lawrence Grayson, a spokesman for the Charlotte-based bank, declined to comment on the litigation.
The cases are part of a U.S. effort to punish companies for actions it says helped trigger the financial crisis. Bank of America alone has spent more than $50 billion to resolve claims related to shoddy mortgages, most tied to its 2008 purchase of Countrywide Financial Corp., once the biggest U.S. mortgage lender.
The SEC claims the lender’s actions amounted to securities fraud, while the Justice Department alleges a violation of a rarely used law dating to the savings-and-loan crisis of the 1980s. The statute allows the government to punish misdeeds too old to be covered by other laws. It also lets the U.S. seek larger damage awards.
Bank of America Corp,
mortgage lawsuit BofA,
Max O. Cogburn,