A North Carolina judge ruled on Thursday that a Justice Department lawsuit against Bank of America Corp could move forward, allowing the complainant 30 days to file its amended petition.
The Department of Justice's lawsuit accuses Bank of America of civil fraud in the sale of mortgage securities that soured during the global financial crisis.
"The court need not reach far outside the complaint or be an expert in economics to take notice that it was the trading of toxic RMBS between financial institutions that nearly brought down the banking system in 2008," Cogburn wrote in an order.
At a hearing last week in Asheville, North Carolina, U.S. District Judge Max Cogburn said he would consider dismissing the lawsuit, saying the DoJ may not have the evidence to try this as a fraud case.
Cogburn had at that time also said he would consider allowing the DoJ to amend its complaint.
A Bank of America spokesman declined to comment, while representatives at the DoJ did not immediately respond to emails seeking comment outside regular U.S. business hours.
Cogburn also ruled that a related lawsuit - by the U.S. Securities and Exchange Commission brought against Bank of America, can move forward.
(Reporting by Supriya Kurane in Bangalore; Editing by Gopakumar Warrier)