The Department of Justice announced Tuesday that it was suing Bank of America for allegedly lying to investors about the riskiness of about $850 million worth of mortgage-backed securities back in 2008.
According to a press release by the Justice Department, the action is part of efforts of the Obama administration's Financial Fraud Enforcement Task Force's RMBS Working Group.
The Wall Street Journal reports the move was expected "since the company acknowledged in a filing last week that the department intended to file civil charges."
Justice explained the allegations like this:
"According to the complaint, in or about January 2008, Bank of America sold BOAMS 2008-A RMBS certificates to investors by knowingly and willfully making materially false and misleading statements and by failing to disclose important facts about the mortgages collateralizing the RMBS, including Bank of America's failure to conduct loan level due diligence in the offering documents filed with the U.S. Securities and Exchange Commission (SEC). These misstatements and omissions concerned the quality and safety of the mortgages collateralizing the BOAMS 2008-A securitization, how it originated those mortgages and the likelihood that the 'prime' loans would perform as expected."
"I applaud Attorney General Holder for taking this important step toward holding Bank of America accountable for packaging and selling toxic loans to investors and brokers, a key cause of the housing collapse that crashed our economy and still plagues communities to this day," New York Attorney General and co-chair of the working group Eric Schneiderman said in a statement.
Update at 4:28 p.m. ET. Obama's Speech:
This news comes just as President Obama delivered a speech about the housing market in Phoenix, Ariz.
Obama said the housing market is on the mend and that his administration has done its part to bring responsibility back to lending.