Bank of America Corporation
) legal problems related to the sale of mortgage backed
securities (MBS) seems never ending. Now, the New York Attorney
General (AG) is investigating the bank's involvement in a number
of transactions regarding underwriting and issuance of MBS. The
company reported this in its latest 10-K filing with the
Securities and Exchange Commission (SEC).
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Over the last few years, BofA has been striving hard to put its
MBS-related problems at bay. The majority of losses stem from MBS
issued by Countrywide Financial Co., acquired in 2008. The
company has resolved several litigations related to MBS, while
there are many still pending.
The current investigations being faced by BofA are a part of the
larger probe being conducted under the aegis of the Residential
Mortgage Backed Securities (RMBS) Working Group. The Group was
formed by President Obama in Jan 2012 to investigate and impeach
the alleged misconducts that led to the financial crisis. The
group consists of officials from the U.S. Justice Department, the
SEC, the FBI and other federal and state officials.
BofA is the third company being targeted by the New York AG over
the role of banks in repackaging and selling MBS. In 2012, the AG
had filed lawsuits against
JPMorgan Chase & Co.
Credit Suisse Group
) for defrauding a large number of mortgage bond investors by
misrepresenting the quality of loans underlying MBS.
The measures being undertaken by the regulatory and legal
authorities to come down hard on such unwarranted activities of
these institutions, including
The Goldman Sachs Group Inc.
) and Citigroup Inc., will deliver huge relief to the investors.
BofA is passing through a rough patch with all the litigation
overhangs. Yet, on the brighter side, the ill-effects of these
are likely to be eliminated by the strong fundamentals of the
BofA currently retains a Zacks Rank #3 (Hold).