Bank of America Legal Issues

In May 2011, BofA reached a $20 million settlement with Justice Department indictments that Countrywide had wrongly excluded serving members of the armed forces without first obtaining the necessary court orders. And in December 2011, BofA agreed to pay $335 million to pay fees that Countrywide had discriminated against minority customers by charging them higher fees and interest rates during the housing boom. In mid-2012, the Wall Street Journal reported that «people near the bank» estimated that Countrywide had cost the BofA more than $40 billion in real estate losses, legal fees, and settlements with state and federal agencies. The resolution of these cases leaves the country`s second largest bank in terms of assets to be resolved with a single significant case of the financial crisis. This is an ongoing dispute between Bank of America and Ambac Financial (AMBC 1.68%) for approximately $2.5 billion in damages that the latter allegedly suffered after insuring mortgage-backed securities issued by Bank of America and/or one of its current subsidiaries – namely Countrywide Financial. Since I last published an ongoing list of Bank of America`s legal misconduct, two more have come to fruition. The first was a $16.65 billion deal between the Charlotte, North Carolina-based bank, the U.S. Department of Justice and a handful of states and federal agencies. The settlement exempted Bank of America from any liability for the sale of toxic mortgage-backed securities to public and private investors in the run-up to the financial crisis. She was also involved in efforts to break down barriers between commercial and investment banking through the purchase of Montgomery Securities. NationsBank has encountered legal problems after implementing high-pressure tactics in its securities business.

In 1997, it agreed to pay $29 million to settle a class action lawsuit alleging that its brokerage joint venture with Dean Witter had engaged in deceptive sales practices. May 14 (Reuters) – Bank of America Corp (LAC. N) agreed to pay $75 million to settle a lawsuit accusing the second-largest U.S. bank of receiving overdraft fees it did not earn from customers with savings and checking accounts, according to court documents. Bank of America is in the process of reaching an agreement with the Federal Housing Finance Agency over allegations that the bank – mainly Countrywide Financial – defrauded Fannie Mae and Freddie Mac. As part of the RMBS Task Force, the U.S. Attorney`s Office conducted a FIRREA investigation into the false statements Merrill Lynch made to investors in 72 RMBS in 2006 and 2007. As the conclusion of the facts shows, Merrill Lynch regularly told investors that the loans it securitized were granted to borrowers who were likely and able to repay their debts.

Merrill Lynch made these statements even though it knew that a significant number of these loans had significant underwriting and compliance deficiencies – including up to 55% in a single group – due to the due diligence it had performed on loan samples. In addition, Merrill Lynch rarely reviewed unadjusted loans to ensure that the deficiencies observed in the samples were not present during the rest of the pools. Merrill Lynch also ignored its own due diligence and securitized loans that due diligence providers had identified as defective. This practice led a Merrill Lynch advisor to «wonder why we would have done our due diligence» if Merrill Lynch securitized loans «regardless of the issues.» Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) has taken enforcement action against Bank of America for processing an illegal, non-state seizure order on its customers` bank accounts. Bank of America illegally froze customers` accounts, charged garnishment fees, seized funds, and sent payments to creditors based on out-of-state garnishment orders that should have been processed under the laws and protections of the states where the consumers lived. Bank of America also violated the law by inserting unfair and unenforceable language into customers` contracts that would have restricted customers` rights to challenge seizures. The CFPB order requires Bank of America to reimburse or waive fees imposed as a result of illegal seizures, review and reform its garnishment processing system, and pay a civil penalty of $10 million.

Bank of America reaches an agreement with American International Group over toxic mortgage-backed securities sold by the bank and its historical companies. The U.S. Attorney`s Office for the Eastern District of New York, along with its partners in the Department of Housing and Urban Development (HUD), conducted a two-year investigation into whether Bank of America knowingly issued FHA-insured loans in violation of applicable underwriting guidelines.