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Bank of America’s $16.65 billion settlement resolves 2 cases from N.C.

Bank of America’s $16.65 billion settlement with the government resolved legal claims from around the country, including two cases that got their start in the Charlotte bank’s backyard.

As expected, the agreement covered a case that Anne Tompkins, the U.S. Attorney in Charlotte, brought a year ago. It accused the Charlotte bank of misrepresenting the quality of prime mortgages that it packaged into investments.

The settlement also encompassed another previously undisclosed case investigated by Tompkins’ office, according to documents released Thursday.

That probe involved a federal whistleblower lawsuit brought by a mortgage lender that accused Bank of America and Countrywide Financial of submitting insurance claims to the Federal Housing Administration for reimbursement amounts it had already received from other lenders, according to the settlement agreement. The docket for the case remained sealed as of Thursday evening.

While many of the problem loans at the center of the settlement were originated by companies acquired by Bank of America – Countrywide and Merrill Lynch – the prime mortgage case focused on behavior by Bank of America itself. The settlement also resolved a related case brought by the U.S. Securities and Exchange Commission.

According to a statement of facts filed Thursday, the bank acknowledged that it marketed an $850 million securitization as being backed by loans that met its own underwriting guidelines. But instead, a significant number of the loans were originated by outside mortgage brokers and were declining in quality.

Internally, Bank of America described these broker-originated loans as “toxic waste,” according to the SEC.

According to the lawsuit filed in August 2013, five investors, including Wachovia Bank, bought roughly $850 million worth of the securities from Bank of America in early 2008. As of June 2013, 23 percent of the 1,191 securitized mortgages had defaulted or were delinquent.

“Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers,” Tompkins said in a statement Thursday. “As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard.”

Tompkins’ second investigation involved a lawsuit brought by a New Jersey-based company called Mortgage Now, which filed its whistleblower suit in June 2012. As part of the investigation, the U.S. Attorney’s office also examined whether Bank of America settled loan repurchase claims with mortgage giants Freddie Mac and Fannie Mae after previously receiving compensation from other lenders.

The U.S. Attorney’s office declined to comment on the case. Mortgage Now could not be immediately reached for comment.

Rothacker: 704-358-5170; Twitter: @rickrothacker
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