BofA subsidiary accused of "massive fraud"

26 January 2011

Bank of America's (BofA's) Countrywide Financial subsidiary has been accused of committing "massive fraud" by a group of investors currently taking legal action against the firm over mortgage-backed securities (MBS).

According to Bloomberg, New York Life Insurance, Dexia Holdings and TIAA-CREF Life Insurance are among 12 companies suing Countrywide - now trading as Bank of America Home Loans - along with more than 20 other defendants.

"Countrywide was an enterprise driven by only one purpose - to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide defendants without regard to the investors," their complaint stated.

In court filings, the investors claimed they purchased securities worth millions of dollars between 2005 and 2007 because Countrywide led them to believe they were of relatively low risk.

Last week, BofA announced that it had made a loss of $1.2 billion in the last three months of 2010, racking up costs of over $4 billion.

By Tony Aynsley

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