Recently, a lawsuit was filed by a trust against a unit of
Merrill Lynch - a unit of
Bank of America Corporation
) - in the New York State Supreme Court in Manhattan. The lawsuit
was associated with Merrill Lynch Mortgage Lending's alleged
infringement of representations and warranties regarding the sale
of roughly 5,000 mortgages.
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The litigation accused Merrill Lynch Mortgage Lending of failing
to buy back loans as per the agreement stipulations in 2007.
Further, the plaintiffs also accused Merrill Lynch and Sand
Canyon - a unit of
H&R Block, Inc.
) - of violating representations and warranties for other
mortgage loans. Moreover, the litigation accused trustee Citibank
N.A. - a unit of
) - of not taking enforcement actions against the alleged
In 2007, Merrill Lynch securitized approximately 5,900
residential mortgage loans from 2 originators to serve as the
basis for securities which were sold to investors. The loans were
finally sold to Merrill Lynch Mortgage Investors and then given
to the trust, before being sold to investors.
According to the plaintiff, both Merrill Lynch and Sand Canyon
contravened the representations and warranties of these loans and
therefore the trust sought more than $309 million in damages for
In Dec 2007, Sand Canyon, previously known as Option One Mortgage
Corp., stopped originating mortgage loans. Later its servicing
assets were sold to American Home Mortgage Servicing and its
remaining operations were discontinued in Apr 2008.
BofA has faced numerous lawsuits, specially associated with
mortgage backed securities. These litigations would surely dent
its reputation and be an overhang on its financials. However, we
believe that the investors, who have lost their hard-earned money
in such investments, should feel relieved.
BofA currently carries a Zacks Rank #3 (Hold). Other banks that
are performing better include
Meta Financial Group, Inc.
), which carries a Zacks Rank #1 (Strong Buy).