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BoA Admits Disclosure Failures to Settle SEC Charges, $245 Million Settlement

41726-hi-Brian_Moynihan_mtgNew York (HedgeCo.Net) – The SEC reports today that The Bank of America (BoA) has admitted that it failed to inform investors during the financial crisis about known uncertainties to future income from its exposure to repurchase claims on mortgage loans. BoA is also resolving securities fraud charges that the SEC filed last year related to a residential mortgage-backed securities (RMBS) offering.

BoA has agreed to settle the two cases by paying $245 million as part of a major global settlement announced today by the U.S. Department of Justice in which Bank of America will pay $16.65 billion to resolve various investigations involving violations of laws regulated by other federal agencies.

“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” said Rhea Kemble Dignam, regional director of the SEC’s Atlanta office. “Requiring an admission of wrongdoing as part of Bank of America’s agreement to resolve the SEC charges filed today provides an additional level of accountability for its violation of the federal securities laws.”

In new charges filed by the SEC today in a settled administrative proceeding, Bank of America admits that it failed to disclose known uncertainties regarding potential increased costs related to mortgage loan repurchase claims stemming from more than $2 trillion in residential mortgage sales from 2004 through the first half of 2008 by the bank and certain companies it acquired.

In the SEC’s original case against Bank of America filed in August 2013, the agency alleged that the bank in its own words “shifted the risk” for losses to investors when it failed to disclose that more than 70 percent of the mortgages backing the RMBS offering called BOAMS 2008-A originated through its “wholesale” channel of mortgage brokers unaffiliated with Bank of America entities. Bank of America knew that such wholesale channel loans – described internally as “toxic waste” – presented vastly greater risks of severe delinquencies, early defaults, underwriting defects, and prepayment.

Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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