Arab Today, arab today us charges bofa over mortgages fraud
Last Updated : GMT 06:58:51
Arab Today, arab today
Arab Today, arab today

US charges BofA over mortgages fraud

Arab Today, arab today

Arab Today, arab today US charges BofA over mortgages fraud

Washington - AFP

Bank of America and its two subsidiaries were charged on Tuesday with hiding key risks from investors when offering 855 million dollars of residential mortgage-backed securities (RMBS) in 2008. The U.S. Justice Department and the Securities and Exchange Commission (SEC) filed parallel civil actions in federal court in North Carolina, alleging that the second-largest U.S. bank by assets failed to disclose key risks and misrepresenting facts about the underlying mortgages. According to the lawsuits, more than 70 percent of the mortgages backing the offering were \"toxic waste\" described by Bank of America\'s then-CEO, but the securities were sold as \"prime\" for the most conservative investors. \"In its own words, Bank of America \'shifted the risk\' of loss from its own books to unsuspecting investors, and then ignored its responsibility to make a full and accurate disclosure to all investors equally,\" said George S. Canellos, Co-Director of the SEC\'s Division of Enforcement. Bank of America denied it was responsible for the losses and said it will refute the government\'s allegations in court. \"These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that,\" the bank\'s spokesman Lawrence Grayson said in an emailed statement. \"The loans in this pool performed better than loans with similar characteristics (made and packaged into securities) at the same time by other financial institutions.\" \"We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result,\" Grayson said. As of June 2013, the securities had an 8.05 percent cumulative net loss rate, representing a loss of nearly 69 million dollars as well as potential losses of about 50 million dollars, said the complaint.

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