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U.S. Bank Sues BofA Over $1.75B in MBS

""US Bancorp"":http://www.usbank.com/index.html joined a field of investors taking issue with the $8.5-billion deal proposed by ""Bank of America"":https://www.bankofamerica.com/, filing suit to recover losses over alleged falsifications, according to multiple news outlets. Following a filing in New York by the FDIC Monday, the suit emerges as the newest in a barrage of legal maneuvers to hit the bank over bad mortgage-backed securities.


The litigation, which Bank of America continues to fend off as it seeks to finalize a mega settlement, concerns loans allegedly misrepresented by Countrywide Financial Corp., which the mortgage giant acquired in a major purchase during the financial crisis.

Lodging the complaint in a Manhattan-based state court, U.S. Bank pursued compensation from the new owner of the assets under Countrywide by alleging a series of misrepresentations in the underwriting quality and borrower details for 4,884 loans in a $1.75-billion mortgage pool, according to ""_Reuters_"":http://www.reuters.com/article/2011/08/30/us-bankofamerica-usbancorp-lawsuit-idUSTRE77T36F20110830.

The news service quoted the complaint by U.S. Bank as saying the bad loans ""began to become delinquent and default at a startling rate,"" with 66 percent, or some 520, of a sample of 786 loans failing to accurately represent borrower eligibility and other information.

The suit asks Bank of America to sign off on a repurchase agreement for all the busted loans as offered up by U.S. Bank, which _Reuters_ reporting the bank as saying that the former has refused to acquiesce or make the needed changes.


Spokespeople for neither Bank of America nor U.S. Bank could be immediately reached for comment.

It is unclear how Bank of America will respond to the continuing suits.

According to _Reuters_, CEO Brian Moynihan made remarks in 2010 that signaled his intentions to fend off suits aiming for Bank of America to buy back bad loans in ""hand-to-hand combat.""

Nevertheless, Bank of America gave the go-ahead this year for massive settlements with other companies and bond insurers, including GSEs ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/ and ""Assured Guaranty Ltd"":http://www.assuredguaranty.com/, the news service reports.

If a judge signs off on the current $8.5-billion settlement, Bank of America could wipe its hands clean of the bad mortgage-backed securities that continue to rile the mortgage giant years after it acquired Countrywide.

The move by U.S. Bank is the latest in a series of legal challenges to the mega settlement.

On Monday the ""FDIC"":http://www.fdic.gov/, an erstwhile regulatory authority, filed concerns in a New York federal court that it still needed to see the figures and other information before the settlement moves forward.

Lawrence Grayson, a spokesperson for Bank of America, told _MReport_ in an e-mail that the mortgage giant believes ""that the trustee [the FDIC] acted reasonably in entering into the settlement, and that there are compelling reasons why the agreement should receive judicial approval.""

Late Tuesday, a ""_Bloomberg News_"":http://www.bloomberg.com/news/2011-08-30/homeowners-sue-to-block-8-5-billion-bofa-mortgage-settlement.html story added to the settlement brouhaha by reporting that four homebuyers had also filed suit to halt the $8.5-billion deal.

""The settlement agreement will speed up foreclosures, perpetuate existing servicing abuses in the system, and undermine federal programs designed to stabilize the housing market,"" _Bloomberg_ quoted their filing as saying.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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