The second biggest U.S. bank, Bank of America (BAC), was sued by CIFG Assurance North America for fraud and breach over insurance policies tied to residential mortgage-backed securities.
The suit is connected with five financial guaranty insurance polices issued by CIFG. The policies refer to two transactions settled by Bank of America that were backed by 22 MBS.
CIFG provided more than $150 million in insurance to make the securities marketable to investors. CIFG was given “garbage data” by Bank of America, which made the loans and certificates backed seem less risky then what they were.
The securities were in Bank of America’s inventory due to the fact that the bank was unable to sell them when it served as the underwriter for the RMBS offerings.
“Bank of America knew of the poor quality of the mortgage loans, and knew the original unsold RMBS were a ticking time bomb on the bank’s books,” stated CIFG in the lawsuit.
CIFG has taken similar actions previously including the suit again GreenPoint Mortgage and the compliant against Goldman Sachs Group (CS).
