Skip to main content

Judge Denied Bank of America’s Motion to Dismiss $850M Mortgage Fraud Case

Robert M. Siegel & Shalia M. Sakona

Last week, Magistrate Judge David S. Cayer of the U.S. District Court for the Western District of North Carolina denied Bank of America’s motion to dismiss the Security and Exchange Commission’s claims against it in SEC v. Bank of America Corporation, et al. The SEC’s complaint is founded upon allegations that “[t]he Bank of America  entities misrepresented and omitted certain material facts regarding an RMBS [issuance], backed by more than $855 million of residential mortgages, known as BOAMS 2008-A, that was offered and sold in 2008.”

Bank of America supposedly portrayed the RMBS offering as being backed by “prime” mortgage loans. But according to the SEC, BOAMS 2008-A was rife with “wholesale” loans, a class of loans allegedly described as “toxic waste” by none other than Bank of America’s CEO at the time. The SEC claims that these “toxic” loans were originated through brokers unaffiliated with Bank of America, and deviated significantly from Bank of America’s own underwriting guidelines.

In denying Bank of America’s motion to dismiss, the Court found that the SEC’s Complaint alleged sufficient facts to establish the defendants’ material misrepresentations and omissions. In particular, the court took note of the SEC’s allegations that Bank of America revealed outside of the disclosure documents to certain of its investors (Wachovia and to the Federal Home Loan Bank-SF) that approximately 70% of the loan pool originated from the “wholesale channel.”  According to the Court, “[d]efendant’s decision to give the wholesale channel information to those investors creates the inference that the defendants knew or reasonably should have known that this information was material.”

Publication November 09, 2015
Since January of 2015, approximately 2,800 rooms have been added to the greater Miami hospitality. And even though inventory has increased, so has demand, both from domestic and international travelers, for Miami’s world-class beaches, unparalleled shopping, nightlife and restaurants and vibra...
Publication September 26, 2014
Bank of America took a big hit when it reached a record-breaking $16.65 billion mortgage settlement with the United States Department of Justice in August.
Financial Services Watch Blog October 18, 2018
Last month, New York’s intermediate appellate court reversed a grant of summary judgment in favor of plaintiff MBIA Ins. Corp.[1] MBIA, an insurer of RMBS trusts and a common plaintiff in this type of litigation, had sued Credit Suisse, the sponsor of the trusts. The trial court had ruled as a...