It appears that the troubles for Bank of America are nowhere near over as yet another law suit has been filed against them. Massive fraud is being sited on accounts that Bank of America acquired from Countrywide in 2008. This time it is insurance companies filing suit, claiming fraud on the mortgage back securities that they purchased from Country Wide between 2005 and 2008.
New York Life Insurance Company along with about a dozen others filed complaint in the New York Supreme Court this week. Investors are claiming that the hundreds of millions of dollars that they spent on mortgage backed securities were advertised as low risk investments. They are making claim that Countrywide knowingly provided false term sheets among other documentation when selling the securities.
According to the complaint, “Countrywide was an enterprise driven by only one purpose-to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide defendants without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates.”
Plaintiffs for the case say that Countrywide, during the housing boom, was able to cash in by writing loans with little or no underwriting standards. As a result they were able to show, for a time, profits before taxes in the billions.
The filed complaint is a couple of hundred pages in length. The complaint describes in detail how mortgages were pushed through by Countrywide for approval prior to the mortgage crisis. For the most part, there were very few loans that did not get the stamp of approval, regardless of whether or not underwriting standards were met. It is reported that loan officers would manually review each application that was rejected by the automated system. They would look for a way to approve the loan and if they still came up dry, the loan application would then be sent on to a senior underwriter for a special exception consideration.
In response Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said in an e- mail. “We will review the suit, but on first glance this sounds like a large, sophisticated investor who now wants to blame someone for the fact that the declining economy caused its investment to lose value.”