- Michigan man among first in U.S. to get ‘bionic eye’
- JetBlue pilots vote to unionize; 2 previous attempts failed
- Pentagon plans to replace flight crews with ‘full-time’ robots
- Navy’s military dolphins may meet Putin’s porpoises in Black Sea
- Forget the Porsche — it’s the guy with the Prius that attracts the ladies, poll shows
- Fired Russian Facebook CEO says site has fallen in the hands of pro-Putin supporters
- Sen. Boozman of Arkansas has emergency heart surgery
- Brazil embraces drones to save the Amazon rain forest
- Teen stowaway shows holes in vast airport security
- Supreme Court to decide if passports can say ‘Jerusalem, Israel’
AIG sues Bank of America for $10B over mortgages
NEW YORK — More trouble piled up for Bank of America Corp. on Monday, as it was sued by American International Group Inc. for more than $10 billion, saying the bank cheated it by selling residential mortgage-backed securities that were overvalued.
AIG's filing comes on top of similar suits, which together put the bank in a precarious position, analysts say. Bank of America's stock dove 18.5 percent, or $1.51, to $6.66 in afternoon trading, revisiting levels seen at the nadir of the recession in March 2009.
AIG said Bank of America and two companies that were later gobbled up by the bank, Countrywide and Merrill Lynch, sold the insurance company $28 billion in securities backed by home mortgages from 2005 to 2007, the height of the housing boom. It said it looked at more than 260,000 of the underlying mortgages and found that the bank's "stated metrics" for 40 percent of the securities were false.
In one case, a borrower said she had been the owner of a construction business for 25 years, which would have made her 10 years old when she took ownership, AIG said.
Bank of America denied the allegations, saying AIG was big enough and sophisticated enough to know the risks.
"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors," Bank of America spokesman Lawrence Grayson said.
AIG spokesman Mark Herr shot back: "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."
AIG shares fell $2.29, or 9.1 percent, to $22.81. They hit a 52-week low of $22.10 earlier in the day.
In June, Bank of America agreed to pay $8.5 billion to a group of investors for selling them poor-quality mortgage securities. AIG's suit is separate, but the company is raising questions about whether the settlement went far enough. On Friday, New York Attorney General Eric Schneiderman urged the judge to reject the settlement, calling it unfair.
Bank of America wrote a number of bad mortgages, but it is in worse shape than other major banks such as JPMorgan Chase & Co. and Wells Fargo & Co. because of its purchase of Countrywide for $4 billion in 2008. What seemed like a bargain price for the country's largest mortgage lender has cost the bank tens of billions more in mortgage losses, regulatory fines, repurchases of poorly written loans and expensive litigation.
In January, B of A paid $2.6 billion to settle buyback claims on home loans sold to Fannie Mae and Freddie Mac. In April, the bank agreed to pay up to $1.6 billion to Assured Guaranty Ltd., an insurer that also pressed the bank to repurchase shoddy mortgages.
In March, the Federal Reserve did not allow Bank of America to increase its dividend, citing uncertainty about the depth of its mortgage problems. It was the only denial issued to the four largest U.S. banks. And it raised questions about whether the bank was strong enough to withstand another economic downturn.
TWT Video Picks
Feds who send arms against ranch families betray American values
- CARSON: When government looks more like foe than friend
- Nevada rancher Cliven Bundy hailed as patriot, renegade
- Tactical advantage: Russian military shows off impressive new gear
- IRS revokes conservative group's tax-exempt status over anti-Clinton statements: report
- America is an oligarchy, not a democracy or republic, university study finds
- ORTEL: Putin sees opportunities as Obama turns away
- Inside China: Marine's comment on islands draws sharp Chinese response
- Supreme Court upholds Michigan affirmative action ban
- Michelle Obama: Obama family Sundays are more for napping than church
- Bonuses given to IRS employes who owed back taxes
Top 10 handguns in the U.S.