Another major bank facing litigation over misrepresentations tied to mortgage bonds sold to Fannie Mae and Freddie Mac lost its chance to have the case completely dismissed by a judge.
The FHFA sued Bank of America-Merrill Lynch (BAC) and 16 other major financial firms this past year, claiming various allegations of fraud on the grounds that the firms sold residential-mortgage backed securities to the GSEs and misrepresented the quality of the loans.
U.S. District Judge Denise Cote out of New York granted Bank of America-Merrill Lynch's push to dismiss claims of fraud tied to representations made about the borrowers owner-occupancy status and LTV ratios, but kept the main parts of the case alive.
The judge's opinion allows the case to go forward with other fraud claims permitted to survive.
Judge Cote wrote: "As in Chase, the facts alleged in the amended complaint are sufficient to plead fraud with respect to the offering materials’ representations regarding mortgage-underwriting standards."