The U.S. complaint accused the firm of misleading investors about the quality of loans tied to $850 million in mortgage-backed securities. While the bank had portrayed the bond as backed by prime loans vetted by its staff, most were riskier wholesale debts, meaning they were originated by outside brokers, authorities wrote. Some were “PaperSaver” loans that hadn’t required proof of borrowers’ income.
Bank of America Corp., sued by U.S. attorneys in August over an $850 million mortgage bond, faces three additional Justice Department civil probes over mortgage-backed securities, according to two people with direct knowledge of the situation.
U.S. attorneys offices in Georgia and California are examining potential violations tied to Countrywide Financial Corp., the subprime lender Bank of America bought in 2008, said the people, who asked not to be identified because the inquiries aren’t public. U.S. attorneys in New Jersey are looking into deals involving Merrill Lynch & Co., purchased by the firm in 2009, the people said.
If claims are brought, Bank of America would join JPMorgan Chase & Co. (JPM) in facing Justice Department demands that it resolve liabilities inherited while buying weakened rivals at the government’s urging during the credit crisis. JPMorgan, the biggest U.S. bank, reached a tentative $13 billion agreement last week to end civil claims over mortgage-bond sales, including those handled by Bear Stearns Cos. and Washington Mutual Inc. operations purchased in 2008.
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