$10 Billion Suit By AIG Adds To Bank Of America’s Woes

Bank of America is named in yet another lawsuit related to its involvement in the mortgage backed securities (MBS) business, according to Bloomberg. This one has been filed by American International Group (AIG) on Monday following Standard & Poor’s downgrade of the U.S. government’s credit rating and it is for over $10 billion. AIG claims that the bank defrauded it when it sold the firm over $28 billion in mortgage backed securities (MBS) between 2005 and 2008. It also claims that the bank convinced the credit rating agencies to give the MBS high ratings by providing them with the same false data that was used in the prospectuses provided to investors. The lawsuit contains a litany of wrongs by Bank of America, Countrywide and Merrill Lynch and their part in marketing and selling the MBS, backed by fraudulently induced, defective mortgages.

The AIG lawsuit comes on the heels of several other lawsuits related to MBS that plummeted after the housing boom. Much of Bank of America’s woes can be traced to its acquisition of Countrywide in 2008 for $4 billion. That acquisition has been a thorn in its side, costing the bank billions upon billions in mortgage related losses, fines, litigation costs and loan buy backs.

As recently as June 2011, Bank of America had reached an agreement to settle with investors for $8.5 billion to resolve their claims related to mortgage backed securities. Some of the parties to that settlement were The Federal reserve Bank of New York, Bank of NY Mellon, PIMCO and BlackRock. That settlement is now being challenged as being inadequate by the New York Attorney General.

According to the Courthouse News Service database, Bank of America and Countrywide have had over 1,300 lawsuits filed against them in 2011, with same or similar allegations.

Contact Us
Contact Us: (800) 259-9010