Yesterday, US Magistrate Judge David Cayer in Charlotte, North Carolina had said that the request of Bank of America to dismiss the case filed by the US Securities and Exchange Commission over $855 million worth of mortgage-backed securities. Bloomberg noted that this was the same judge who suggested that the claim over BofA's securities by the US Justice Department should be thrown out.
Cayer had said that SEC's case against BofA was justifiable as the complaint was able to argue adequately that the bank allegedly had not disclosed that the majority of the mortgages were acquired at a wholesale from third-party brokers. Cayer also added that the complainant had laid out facts sufficient enough to prove that the defendants committed negligence in making significant misrepresentations and omissions.
According to SEC, 70% of the 1,200 jumbo, adjustable-rate mortgages that were sold in the secondary market wee wholesale loans deemed "toxic waste" by BofA's then chief.
The judge's decision to refuse the dismissal of the SEC lawsuit against BofA follows his recommendation to throw out the Justice Department's lawsuit against the lender for its part that led to the 2008 financial crisis under the Financial Institutions Reform, Recovery and Enforcement Act, or FIRREA. Bloomberg said that the 1989 law that comes with a 10-year statute of limitations has been used by federal prosecutors to sue financial institutions and other industry players that contribute to the crisis. Cayer said it had recommended the dismissal as the government failed to establish its claim that the second-biggest lender in the US had lied to the Federal Housing Finance Board about the mortgages.
Bloomberg said that the Cayer's findings in both SEC and Justice Department cases will be reviewed by US District Judge Max Cogburn Jr. The US government or the bank could appeal an order by Cogburn after his review.
In an email to address about the decision over SEC' case against BofA, Charlotte-based Bank of America spokesman Lawrence Grayson said, "We are reviewing the magistrate judge's recommendation carefully."
