New York investigating BofA for mortgages-filing

Thu Feb 28, 2013 7:35pm EST

Tourists walk past a Bank of America banking center in Times Square in New York June 22, 2012. REUTERS/Brendan McDermid

Tourists walk past a Bank of America banking center in Times Square in New York June 22, 2012.

Credit: Reuters/Brendan McDermid

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(Reuters) - Bank of America Corp (BAC.N) said in a securities filing on Thursday that the New York State Attorney General was investigating the bank over its purchase, securitization and underwriting of home loans.

The bank, the second-largest in the United States, is the third known to be targeted by the New York attorney general's office over how banks bundled mortgage loans into securities during the housing boom.

Bank of America said in the filing with the U.S. Securities and Exchange Commission that it was cooperating with the investigation. A bank spokesman declined to comment.

James Freedland, a spokesman for New York Attorney General Eric Schneiderman, did not return a call and an email seeking comment.

Bank of America has been working to put its mortgage-related troubles behind it after sustaining more than $40 billion in losses from its home loan business since the financial crisis. Most of those losses stemmed from its 2008 purchase of Countrywide Financial, once the largest U.S. subprime mortgage lender.

Schneiderman is co-chair of a working group created by the Obama administration in January 2012 to go after wrongdoing in mortgage securities that led to the financial crisis.

Schneiderman filed a civil fraud case against JPMorgan Chase & Co (JPM.N) in October over mortgage-backed securities originated and sold by Bear Stearns. The lawsuit accused Bear of a "systematic abandonment of underwriting guidelines."

In November, he filed a similar lawsuit against Swiss bank Credit Suisse Group AG (CSGN.VX).

Creating and packaging defective loans for sale to investors helped cause the housing bubble and subsequent collapse.

The New York attorney general's office also has another case pending against Bank of America. In 2010, then-New York attorney general Andrew Cuomo filed a lawsuit against the bank and its former chief executive Ken Lewis over the acquisition of Merrill Lynch during the financial crisis.

Bank of America disclosed the latest investigation in its annual 10-k filing with the SEC. In the filing, the bank said it could sustain up to $3.1 billion in legal losses beyond the amount for which it has reserved. That was up from a possible loss above legal reserves of $2.8 billion at the end of the third quarter.

(Reporting By Rick Rothacker, Aruna Viswanatha, Karen Freifeld and Lauren Tara LaCapra; Editing by Tim Dobbyn and Martin Golan)

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