The Justice Department sued Bank of America on Tuesday, accusing the bank of defrauding investors by vastly underestimating the quality of mortgage backed securities.
The lawsuit is the latest action by President Obama’s federal mortgage task force that has vowed to hold Wall Street accountable for misconduct in the packaging and sale of mortgage securities during the housing boom.
Bank of America, the Justice Department said, cloaked the risk associated with $850 million worth of securities backed by residential mortgages. In a corporate filing last week, Bank of America said it was bracing for the action.
Eric Holder, the United States  attorney general, said the lawsuit was “the latest step forward in the Justice Department’s ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct.â€
As Bank of America assembled securities in 2008, the government claimed, the bank ignored that more than 40 percent of the mortgages included did not meet underwriting guidelines. Even though Bank of America knew about the troubled mortgages, the government said, the bank sold the securities anyway.
Unlike other lawsuits, this  case zeros in on prime mortgages, rather than the subprime loans-mortgages that became a hallmark of the 2008 financial crisis.
The lawsuit also takes aim at Bank of America’s own mortgage operations, rather than those of Countrywide, the troubled subprime lender that has created vast mortgage headaches for the bank since it was acquired.
Justice Department’s lawsuit against Bank of America
