BofA Hit with Another $1 Billion Lawsuit
Countrywide Financial Corp., now part of Bank of America Corp. (NYSE: BAC) is the gift that just keeps on giving. Today, for example, the former high-flying mortgage lender delivered a lawsuit to BofA from the U.S. Attorney for the Southern District of New York seeking at least $1 billion in damages for fraudulent lending practices.
The government alleges that Countrywide and BofA simply lied about the quality of loans that were sold to Fannie Mae and Freddie Mac as qualified for federal insurance. BofA acquired Countrywide in 2008 and the loans were sold to the federally-backed agencies between 2007 and 2009.
The suit is being brought under the Federal False Claims Act and could cost BofA triple damages if the government can prove its case. Two weeks ago the same U.S. attorney filed suit against Wells Fargo & Co. (NYSE: WFC) claiming that the bank had issued mortgages without regard to the borrowers' ability to repay them and then fobbed the loans off on the Federal Housing Administration.
BofA in February agreed to settle a similar case for $1 billion in the eastern district of New York, and just last month the bank paid $2.43 billion to settle claims related to its acquisition of Merrill Lynch & Co. BofA is also among 18 banks being sued by the Federal Housing Finance Agency, the government regulator of Fannie and Freddie, for violating federal securities laws related to the sale of residential mortgage-backed securities.
BofA has so far had to bear about $42 billion in litigations expenses, payouts, and reserves related to the financial crisis of 2008-2009, according to The Wall Street Journal.
Today's lawsuit probably isn't enough to kill BofA, but it's more than a bee sting and makes one wonder when the pain will stop.
Shares of the company's stock are up about 0.8% at $9.44 in a 52-week range of $4.92 to $10.10.
Filed under: 24/7 Wall St. Wire, Banking & Finance, Law, Regulation Tagged: BAC, featured, WFC