(CN) - The FDIC sued Bank of America, as successor to Countrywide Home Loans, for allegedly making false statements and representations to investors about the risks of securities backed by home mortgage pools that led to the failure of Illinois-based Strategic Capital Bank.
The bank bought certificates worth approximately $62 million "backed by a collateral pool of residential mortgage loans in three securitizations," the complaint states. "When they issued and underwrote the certificates, the defendants made numerous statements of material facts about the certificates and, in particular, about the credit quality of the mortgage loans that backed them. Many of those statements were untrue. Moreover, the defendants omitted to state many material facts that were necessary in order to make their statements not misleading."
As an example, attorneys for SCB said that Countrywide made "untrue" statements and left out other important information about the mortgage loans' "loan-to-value" ratios including "the extent to which appraisals of the properties that secured the loans were performed in compliance with professional appraisal standards, the number of borrowers who did not live in the houses that secured their loans (that is, the number of properties that were not primary residences) and the extent to which the entities that made the loans disregarded their own standards in doing so."
The Federal Insurance Deposit Corporation is the acting receiver for both Strategic Citizens Bank and Citizens National Bank. Both are Illinois banks that closed their doors in 2009. The FDIC's suit names as defendants Bank of America Corp, CWALT Inc., the company responsible for issuing the certificates, and Citigroup Global Markets Inc., which, along with Countrywide Securities Corp., underwrote the certificates.
David Grais, Mark Holton and Mary Menge, of Grais & Ellsworth, as well as Michael Matthias, Gabriel Drucker and Baker Hostetler are representing the FDIC.