California Reportedly Subpoenas BofA Over Toxic Securities

The sub-prime mortgage era may have ended three years ago but the legal fallout continues.

On Tuesday, investigators with the California attorney general’s office served subpoenas to Bank of America in connection with the sale and marketing of troubled mortgage-backed securities to California investors.

The state is trying to determine whether the bank and its subsidiary, Countrywide Financial, sold investments backed by risky mortgages to institutional and private investors in California under false pretenses.

California AG Kamala Harris recently walked away from on-going talks with fellow state attorneys general saying that what the banks were offering was not enough and that California would continue to pursue a settlement on its own.

“I think the California AG is seeking leverage here,” Nancy Bush, an independent bank analyst and contributing editor to research firm SNL Financial, said. “They have backed out of whatever 50-state AG settlement that is coming down the road, and they want more from that settlement, so, you know, why not bring a little extra pressure to bear?”

Harris has already created a taskforce to investigate mortgage fraud, including the securitization of home loans. This recent round of subpoenas could indicate that Harris is widening her probe of the big mortgage lenders.

Better late than never for mortgage fraud investigation for homeowners and investors in California, we suppose. Perhaps this will spur additional investigations across the country. Is there any positive news here for agents or their clients? We’d love to hear your thoughts.

Read the entire story from the Los Angeles Times here.