FDIC lawsuit tossed

by MPA28 Aug 2013

A federal judge has thrown out Bank of America’s lawsuit against the Federal Deposit Insurance Corporation. The suit stemmed from more than $1.7bn in investor losses from the 2009 collapses of a regional bank and a mortgage lender, according to a Reuters report.

BOA sued the FDIC over its role as receiver for and banking unit of Colonial BancGroup, an Alabama bank that failed in 2009, and the collapse of Taylor, Bean & Whitaker Mortgage Corp., which federal prosecutors have alleged was involved in mortgage fraud to the tune of $2.9bn.

BOA was a trustee for notes issued by Taylor Bean’s Ocala Funding LLC unit, according to Reuters. The banking giant said that the FDIC wrongly denied Ocala noteholders’ claims to recover from Colonial BancGroup.

A federal judge had already dismissed some of Bank of America’s claims against the FDIC in December, but allowed the bank to continue pursuing others.  On Monday, however, she threw those claims out as well, saying that she was deprived of jurisdiction in the case by the FDIC’s determination that Colonial’s estate lacked the assets to satisfy general unsecured claims, according to Reuters.

The problems began when Taylor Bean sold phony loans to Colonial, diverting money from Ocala and providing BOA with fake collateral lists, Reuters reported. Former Taylor Bean Chairman Lee Farkas is currently serving 30 years in prison after being convicted of bank fraud, securities fraud, wire fraud and conspiracy in the case.


Should CFPB have more supervision over credit agencies?