Feds Sue BofA Over 'Jumbo' Loans

Bank accused of hiding information about risky prime mortgages

By Neal Colgrass,  Newser Staff

Posted Aug 6, 2013 3:15 PM CDT

(Newser) – The US Justice Department filed another lawsuit against Bank of America today—this one a civil suit claiming the bank had defrauded investors over $850 million in mortgage-backed securities. Investors lost $70 million and will lose $50 million more, the suit contends, after prime mortgages that supported the securities went sour. BofA is accused of hiding information about the riskiness of these so-called "jumbo" loans created for higher-end homes, the Charlotte Observer reports.

In other words, the bank allegedly said prime mortgages were safe bets when in fact they were just as risky as subprime loans. Federal officials also accused the bank of misleading investors about borrowers' income, which BofA apparently failed to verify in many cases. The Justice Department filed a $1 billion suit against the Charlotte-based bank last year, claiming BofA and its Countrywide unit created a scheme to generate thousands of toxic loans.

A customer uses a Bank of America  ATM in downtown Charlotte, N.C., Tuesday, July 16, 2013.
A customer uses a Bank of America ATM in downtown Charlotte, N.C., Tuesday, July 16, 2013.   (AP Photo/Chuck Burton)
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