Newscast Media NEW YORK—A Manhattan jury found Bank of America responsible for fraud in its mortgage-related practices, in conjunction with its now-defunct Countrywide Financial Corp. affiliate.
Forbes said: “The verdict is a win for the US government as this is one of the few cases stemming from the financial crisis that it’s taken to trial.
“In a rush to feed at the trough of easy mortgage money on the eve of the financial crisis,
Bank of America purchased Countrywide, thinking it had gobbled up a cash cow. That
profit, however, was built on fraud, as the jury unanimously found,” US Attorney Preet
Bharara said in a statement.
Bank of America may or may not appeal. The bank said in a statement, “The jury’s decision concerned a single Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company. We will evaluate our options for appeal.”
Bank of America’s problems aren’t over yet. The Securities and Exchange Commission is also suing the bank for “fraud” because BofA obtained money and property by means of untrue statements of material fact, and also engaged in transactions, practices and courses of business which would and did operate as a fraud and deceit upon the purchasers of such securities.
One of the counts Bank of America is being charged with is failure to file a prospectus with the SEC. The prospectus is accompanied by the infamous Pooling and Servicing Agreement (PSA) the one every lawyer is afraid. No lawyer in the history of litigation of mortgage-backed securities, has been successful in producing a valid PSA or prospectus, because they don’t teach “structured financing” in law school.
Under US law, if a bank claims to own a mortgage in form of a mortgage-backed security, it has to have a prospectus that is valid and current. If it can produce the prospectus, it cannot produce the Pooling and Servicing Agreement, therefore it cannot win a case, because the mortgages are based on fraud. Think of it as a driver being stopped by police for a traffic violation and the driver cannot produce a driver’s license and proof of insurance. What do you think would happen? Here is the specific law:
15 U.S.C. §§ 77e(b)(1):
(b) Necessity of prospectus meeting requirements of section 77j of this title
“It shall be unlawful for any person, directly or indirectly—(1) to make use of any means
or instruments of transportation or communication in interstate commerce or of the
mails to carry or transmit any prospectus relating to any security with respect to which a
registration statement has been filed under this subchapter, unless such prospectus meets the requirements of section 77j of this title.”
The SEC is asking for an unspecified amount of damages including injunctive relief against Bank of America, while the US government is looking to get $848 million out of BofA.
Bank of America Corp said on Thursday that it was cutting 1,200 to 1,300 mortgage jobs.
Categories: News Tags: Bank of America, Bank of America class action, Bank of America Countrywide Financial Corp, Bank of America foreclosure lawsuit, Bank of America Merril Lynch, bank of america mortgage fraud, Bank of America SEC lawsuit, Bank of America settlement, Department of Justice Bank of America, US government vs. Bank of America