The Justice Department filed a civil lawsuit against Bank of America Tuesday afternoon alleging the bank knowingly defrauded investors on $850 million worth of mortgage back securities, according to Reuters and the Wall Street Journal.
The Journal has the details from the complaint:
According to the complaint, more than 40% of the 1,191 mortgages in the collateral pool for the securities didn't substantially comply with the bank's underwriting standards. The government alleged that Bank of America knew some of these loans didn't adhere to those standards.
This is coming on the heels of the President's latest push on housing, kicked off today in Arizona, that will include potentially phasing out Freddie Mae and Fannie Mac. The New York Times makes two very interesting points: the suit focuses on prime mortgages, not subprime mortgages -- the ones that became the hallmark of the housing crash -- and charges Bank of America over its own mortgage bundling practice, not over mortgages done by Countrywide Financial, which Bank of America took over after the economy collapsed.
Last week a jury in New York found former Goldman Sachs trader Fabrice "Fab" Tourre guilty on civil fraud charges brought by the Securities and Exchange Commission for his role in mortgage-backed securities fraud leading up the crash of the housing market. But the Tourre verdict sparked a small backlash of people calling for more institutions to be held accountable for the 2008 crash of the housing market.