Bank of America Corp. has agreed to pay $335 million to settle a class action accusing the bank of intentionally misleading investors about widespread issues with its system for keeping track of mortgages. The bank disclosed the settlement in a recent securities filing. The bank said in a 10-Q form that it had reached an agreement with the Pennsylvania Public School Employees’ Retirement System (MRMS), the lead Plaintiff in the suit over the electronic registry Mortgage Electronic Registration Systems (MERS), to which banks can give technical title on mortgages.
Some courts have said banks cannot foreclose on mortgages held by MERS, which led to widespread problems in the banking industry after the real estate market collapse. Bank of America had set aside the $335 million for the settlement in late June. But at press time the settlement hadn’t won court approval.
Institutional investors filed the suit in 2011, accusing five Bank of America executives, including CEO Brian T. Moynihan, of artificially inflating securities prices by making misleading statements to investors, about both the bank’s vulnerability to repurchase claims regarding billions of dollars’ worth of mortgage-backed securities and its failure to comply with generally accepted accounting principles and federal regulations.
Bank of America promised purchasers of its mortgage-backed securities that it would buy them back if there were title problems in the underlying mortgages. The bank was later hit with billions of dollars in repurchase demands. The Plaintiffs claim the bank acted with the intent to defraud investors about how problems with MERS could affect their securities. For example, they contended that senior bank staff signed affidavits falsely claiming personal knowledge of bank loans in a bid to secure foreclosures – evidence they knew the MERS system was not working. Problems related to MERS have led regulators to target Bank of America and other major institutions. In February, New York Attorney General Eric Schneiderman sued Bank of America and JPMorgan Chase & Co., alleging they used MERS to fraudulently foreclose on thousands of homeowners.
In July 2012, U.S. District Judge William H. Pauley found that allegations against the current and former Bank of America executives were insufficiently pled but dismissed them without prejudice, allowing the Plaintiffs – institutional investors led by the Pennsylvania school pension fund – to revise the complaint and refile. Judge Pauley ruled that the amended complaint was adequate to get the case past a motion to dismiss. In 2014, Bank of America didn’t oppose the investors’ request for certification. The class consists of an unspecified number of investors who bought stock in the bank from February 2009 through October 2010.
Contact us today for a free legal consultation with an experienced attorney.
Fields marked *may be required for submission.
If you would like to subscribe to the Jere Beasley Report digital edition, simply visit our Subscriptions page and provide the necessary information or call us at 800-898-2034.
Attorney Advertising - Prior results do not guarantee a similar outcome.