Bank of America Corp (NYSE:BAC) has disclosed that it is facing civil charges from the Department of Justice over mortgage-backed securities, Tom Braithwaite and Kara Scannell of the Financial Times report. Bank of America Corp (NYSE:BAC) has been in and out of legal trouble since the crisis began in 2008 for lending to people who could not have realistically paid back their debts, but the DoJ has mostly stayed out of those proceedings.
Justice Department “intends to file civil charges..”
Unlike previous legal proceedings dealing with Bank of America Corp (NYSE:BAC)’s sub-prime mortgages, Bank of America disclosed in regulatory filings that the Justice Department “intends to file civil charges against Bank of America entities arising from one or two jumbo prime securitisations.” Jumbo prime loans are mortgages of $417,000 or more. The SEC will also recommend civil charges regarding the jumbo prime loans.
Bank of America is also trying to prevent homeowners from turning a collection of smaller lawsuits into a class action suit, report Janelle Lawrence and David McLaughlin from Bloomberg Businessweek. The suits center on BoA’s involvement in the Home Affordable Modification Program (HAMP), which would have changed the terms for many homeowners so that their mortgages were more manageable.
Bank of America instructed employees to lie to customers
“We can prove the bank had a company-wide plan to delay the decision because they didn’t want to grant these modifications,” said Steve Berman of the law firm Hagens Berman Sobol Shapiro LLP. The plaintiffs contend that Bank of America Corp (NYSE:BAC) instructed employees to lie to customers and falsify documents to force customers into foreclosure instead of going through the process set out in HAMP. Creating a class action suit gives plaintiffs more leverage in negotiations, and reduces the per capita cost of litigation that forces many smaller plaintiffs out of court.
Bank of America Corp (NYSE:BAC) says that a class action lawsuit isn’t appropriate in this instance because the situations and locations of the different complaints vary too widely, and that they must be addressed on an individual basis. Investors continue to be concerned about Bank of America’s ongoing legal liabilities and the potential for more big lawsuits in the future, but the bank wrote in a filing that it is putting these issues behind it.
“We have made progress resolving many issues and will continue to work to address any outstanding matters.”