Bank of America sued by the government over mortgage securities

7 August 2013

The US government has filed two lawsuits against Bank of America accusing the institution of fraud on $850 million of securities backed by mortgages.

Both suits were filed in North Carolina by the Justice Department and the Securities and Exchange Commission, with attorney general Eric Holder claiming the government wanted "justice for those who have been victimised".

The government alleged that the institution "knowingly and wilfully misled investors" about the safety and quality of their investments in a residential mortgage-backed security programme.

Bank of America denied the charges and stated the "prime mortgages" were sold to "sophisticated investors".

The security was worth around $850 million when it was issued in January 2008 but collapsed during the financial crisis as the quality of the loans deteriorated, leading to investor losses of over $100 million, according to the filed complaint.

However, Bank of America has said it was not to blame for the failure.

By Claire Archer

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