Bank of America is reportedly facing a lawsuit from The American International Group (AIG) over hundreds of mortgage-backed securities.
AIG’s lawsuit centres on the allegation that Bank of America misrepresented the standard of mortgage bond investments that lenders offered to investors ahead of the global economic crisis. The organisation is seeking compensation from Bank of America, and is the latest in an ever-expanding list of investors pursuing compensation for mortgages that exacerbated the financial crisis.
However, a spokesperson for Bank of America, Lawrence DiRita, refuted AIG’s allegations of negligence and misrepresentation on behalf of the financial institution, saying:
“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.”
Both organisations are likely to have professional indemnity insurance for cases of this kind, and in this instance such cover will be sorely needed. The lawsuit looks set to become the biggest mortgage security action of its kind, as AIG attempts to cover losses of more than $10 billion on investments believed to be worth $28 billion.