The Justice Department alleges that Bank of America defrauded buyers of mortgage-backed securities with misleading information about the quality of the underlying loans, according to a CNN report. Toxic mortgage-backed securities, many of which were rated as safe, began to fail in epic numbers in 2008, playing a key role in the financial meltdown.
Citing an unnamed US official, CNN said any deal between BOA and the government is still weeks away.
The current talks are just the latest chapter in Bank of America’s legal troubles. In March, Bank of America agreed to pay $6.3 billion to settle lawsuits filed by the Federal Housing Finance Authority. The agency alleged the bank misrepresented the quality of loans underlying billions of dollars in securities purchased by Fannie Mae and Freddie Mac. And the Manhattan US Attorney’s Office is currently suing the bank for $2.1 billion under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
Bank of America is reportedly negotiating a deal with the federal government and several states that could result in a $12 billion settlement over the institution’s mortgage banking practices.