California reportedly Subpoenas BofA over Toxic Securities

ATTORNEY NEWSLETTER

Investigators with the California state attorney general’s office subpoenaed Bank America Corp. on Tuesday October 18, in order to determine whether the bank and its subsidiary, Countrywide Financial, sold investments backed by risky mortgages to California investors under false pretenses. The value of these investments dropped precipitously when the housing market collapsed.

A coalition of state attorneys general and federal agencies are engaged in talks with major banks to push for a broad foreclosure settlement. California left these talks because it was dissatisfied with the banks’ offers. The Tuesday subpoenas are a sign that California wishes to exert pressure on the banks to offer a larger settlement, as well as initiate its own investigation.

These subpoenas may also indicate that Attorney General Kamala Harris is launching her own probe of the big bank mortgage lenders. She created a mortgage fraud strike force that delves into all aspects of the industry.

Countrywide Financial Corp. is largely responsible for the housing bubble’s inflation and bursting, as it sold high-risk subprime and “lair” loans to borrowers. It bundled these high-risk, toxic loans to back private-label securities that went sour on investors. It lobbied the government to relax standards at the government-sponsored companies Freddie Mac and Fannie Mae, the results of wish have cost taxpayers billions of dollars. Bank of America Corp. acquired Countrywide Financial Corp. in 2008 and has been picking up the pieces since Countrywide skidded towards bankruptcy.

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