BofA Must Face U.S. Suit Over Mortgage-Securities Fraud

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BofA Must Face U.S. Suit Over Mortgage-Securities Fraud

BofA Must Face U.S. Suit Over Mortgage-Securities Fraud

Bloomberg-

Bank of America Corp. must face the U.S. Justice Department’s lawsuit accusing it 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, North Carolina, gave the government 30 days to revise the suit after a magistrate judge earlier found its complaint was deficient and recommended it be dismissed. Cogburn said in yesterday’s ruling that the government hadn’t adequately supported claims that bank documents omitted key facts and included false statements.

The case is part of a U.S. bid to punish companies for actions it says helped trigger the financial crisis. The Bank of America case and others like it rely on a law dating to the savings-and-loan crisis of the 1980s that allows the government to punish misdeeds that are too old to be covered by other statutes. It also lets the U.S. seek larger damages awards.

“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.

[BLOOMBERG]

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