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Bank of America (NYSE:BAC) has not reached the end of its litigation streak; even though the bank settled charges of selling fraudulent loans to Fannie Mae (FNMA.OB) earlier this week, Preet Bharara, the U.S. Attorney for the Southern District of New York, will continue to pursue a second federal lawsuit charging the company with fraud, according to the Charlotte Business Journal.
In October, Bharara accused the Charlotte-based bank and the mortgage lender Countrywide Financial of developing a strategy known as “HSSL” or “the Hustle,” which stands for High Speed Swim Lane. The suit alleged that this practice was implemented to remove quality checks so that high volumes of mortgages could be approved quickly and sold to government agencies like Freddie Mac (FMCC.OB) and Fannie Mae.
The 2008 acquisition of Countrywide Financial has cost Bank of America more than $40 billion in settlements over the subprime lender’s allegedly fraudulent mortgages, and litigation has continued to trouble the bank to this day. On January 8, the bank announced a $10 billion settlement that resolves claims that it made bad mortgages before the financial crisis. These difficult to repay mortgages were sold to the government, and the taxpayer-funded Fannie Mae suffered huge losses when borrowers defaulted.
While the Bharara lawsuit follows a similar argument, he will not drop the charges. “Our lawsuit against Bank of America for its allegedly reckless and fraudulent lending practices is unaffected, and is in fact expressly carved out from the settlement that the parties reached earlier this week,” said the attorney’s spokeswoman Ellen Davis in a statement seen by the Journal.
Shares of Bank of America closed at $11.43 on Wednesday, losing close to 6 percent of their value so far this week. Reflected in the stock’s losses is the $10 billion settlement with Fannie Mae, the $8.5 settlement the bank and nine other mortgage servicing companies made with the Federal Reserve, and a downgrade. Analysts at Credit Suisse downgraded the bank from a Buy to a Hold on January 9, based on the belief that its share valuation has gotten ahead of itself.
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