by Shahien Nasiripour, full article at link above, excerpt below:
Bank of New York Mellon, the trustee representing the investors, “knowingly, repeatedly, and consistently” misled investors into thinking that the mortgage bonds were created properly, Schneiderman said in court documents. BNY Mellon also put its own interests before those of the investors it’s supposed to represent, he said.
BNY Mellon, the 11th-largest U.S. bank by assets and one of the nation’s largest trustees, stands accused of “repeated fraud and illegality,” according to court filings, which alleges that the abuses “were repeated literally hundreds of times.”
In short, Countrywide Financial, the lender purchased by BofA in 2008, failed to properly assemble loan documents needed for the creation of mortgage securities, and BNY Mellon effectively looked the other way, which “apparently triggered widespread fraud,” Schneiderman said in court documents.
BNY Mellon should have known the mortgage securities were improperly created because the evidence was “abundant,” Schneiderman asserted, citing the bank’s own documents, news coverage of “foreclosure fraud” and foreclosure actions brought on the bank’s behalf.
Schneiderman also accused Bank of America of fabricating the missing documents when it came to foreclosing on homeowners who defaulted on their mortgages.
There are “serious questions about the fairness and adequacy” of the proposed settlement agreement, Schneiderman said in court documents.
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It also opens up new worries for BofA, the nation’s largest handler of home loans, as the company could be faced with the prospect of having New York’s top legal officer determining that untold billions of dollars’ worth of mortgages turned into securities by Countrywide, the nation’s largest mortgage company when purchased by Bank of America during the credit crisis, aren’t really securities at all due to failures in the security-creating process.
Schneiderman’s actions also threaten Bank of New York Mellon, the trustee for those mortgage bonds, with unknown losses, as his office may determine that the firm didn’t properly assemble and maintain critical loan documents necessary for mortgage instruments to become securities per New York state law. In his office’s court filing, Schneiderman is asking to comb through additional mortgage documents to see if the rot he claims to have discovered is more widespread.
New York’s top law enforcement officer has waged an aggressive campaign in trying to root out Wall Street wrongdoing during the housing bubble. Experts and federal bailout watchdogs have questioned whether lenders and other firms took the necessary steps when bundling home loans into securities. Sloppy practices were common, some analysts assert.
“If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever,” Adam J. Levitin, a bankruptcy expert and professor at Georgetown University Law Center, told a congressional panel last November. Levitin said the problem could “cloud title to nearly every property in the United States” and could lead to trillions of dollars in losses.