The Federal Home Loan Bank of Chicago is suing Bank of America (BAC) for allegedly providing misinformation regarding residential mortgage-backed securities sold to the firm between 2005 and 2007. According to a letter to investors from President and CEO of the FHLBC, Matthew Feldman, the securities listed in the complaint totaled more than $4.3 billion and were all rated triple-A when purchased. “We contend that the quality of the loans that comprise the pools of securities cited in today’s complaints was inconsistent with the description in the pre-purchase documents prepared by the underwriters and issuers of the securities,” Feldman wrote. Complaints were filed in the Circuit Court of Cook County in Illinois, the Superior Court of California in Los Angeles and the Superior Court of Washington in King County. Feldman also said that estimated credit losses on the securities in question resulted in $455 million in write-downs that negatively impacted the firms income, retained earnings and ability to restore a dividend. Bloomberg recently reported that Citigroup, Inc. (C), Goldman Sachs Group Inc. (GS), and Wells Fargo (WFC) are also defendants in the case. Requests to confirm this information with the FHLBC are pending. () Write to Christine Ricciardi. Disclosure: The author holds no relevant investments.
Federal Home Loan Bank of Chicago sues BofA over MBS quality
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