American International Group Inc. aka AIG said Monday it sued Bank of America Corp. (BOA) for more than $10 billion, claiming the BOA cheated it by selling residential mortgage-backed securities that were overvalued. Thus claiming they were deceived through misrepresentation. Bank of America denied the allegations, claiming AIG "recklessly" chased investments with high returns, and was sophisticated enough to know the risks involved in such purchases. Banks have been hit by a series of suits over misrepresentations of mortgage-based securities. As noted in earlier blogs, banks were pooling mortgages into a security instrument, a process known as securitization, and then sold it to investors, including AIG, for profit.
AIG states Bank of America and two companies it took over, Countrywide Bank and Merrill Lynch, sold AIG $28 billion in securities backed by home mortgages between 2005 and 2007, during the peak of the housing boom. AIG said it looked at more than 260,000 of the underlying mortgages, and found that the bank's "stated metrics" for 40 percent of the securities were false. Surely, BOA will claim this is something AIG could have looked at before making any purchases, which is part of any due diligence process.
Bank of America spokesman Lawrence Grayson said the blame lies with AIG. "AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors."
AIG spokesman Mark Herr argued back saying "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."
In June 2011, Bank of America agreed to pay $8.5 billion to a group of investors for selling them poor-quality mortgage securities. AIG's current suit is separate, but the company is raising questions about whether the settlement went far enough. Last week, New York Attorney General Eric Schneiderman urged the judge to reject the settlement, calling it unfair.
If you are a homeowner who is currently in a foreclosure lawsuit where the loan was originated by Bank of America, CountryWide or Washington Mutual, it is in your best interest to consult a qualified attorney in your locality to discuss your options.
Contact the Law Firm of Eran D. Grossman for New York City foreclosure cases.
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