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AIG Files Suit Against BofA While Opposition to Settlement Continues

""American International Group Inc."":http://www.aigcorporate.com/index.html (AIG) filed a lawsuit Monday against ""Bank of America"":http://promo.bankofamerica.com/multiproduct/index2.html?cm_mmc=EBZ-EnterpriseBrand-_-Google-PS-_-bank%20of%20america-_-Bank%20Of%20America%20Exact claiming the bank's subsidiaries, Countrywide and Merrill Lynch, withheld information from its investors regarding loan quality.


AIG hopes to secure more than $10 billion from Charlotte, North Carolina-based BofA to recover losses resulting from the alleged non-disclosures.

The New York-based insurance company â€" which previously received $182.3 billion in government bailouts â€" accuses BofA of giving investors, including AIG, a false account of the performance of its residential mortgage-backed securities and misrepresenting information to credit rating agencies to receive inflated ratings.

Between 2005 and 2007, AIG invested in almost 350 residential mortgage-backed securities, spending $28 billion on what the company now says were ""backed by hundreds of thousands of defective mortgages,"" according to AIG's filing with the Supreme Court of the State of New York.

""As AIG has said in the past, we are looking carefully at what counterparties and others have done to AIG, and we intend to take legal action against those who have harmed us,"" AIG said in a statement released Monday after the filing.

""Bank of America's fraud cause billions of dollars in damage to AIG and we are bringing this suit today to protect AIG and the taxpayers' stake in it,"" AIG said.

""This is not the first lawsuit that AIG has filed against counterparties that have sought to profit at our expense and we anticipate that it will not be the last,"" AIG continued.


BofA maintains that AIG is responsible for its own losses and rejects all of AIG's accusations of fraud.

""AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets,"" BofA said in a statement responding to AIG's charges.

""AIG is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors,"" BofA states.

""We reject AIGs assertions and allegations,"" the bank says.

Shortly after filing suit Monday morning, AIG also filed a petition opposing BofA's $8.5 billion settlement of its Countrywide loans.

In recent weeks, BofA's efforts to settle investors' repurchase claims of Countrywide loans have met with opposition from several parties.

New York Attorney General Eric Schneiderman, six Federal Home Loan Banks, and a group of 15 institutional investors filing suit in California are all challenging the settlement or seeking their own individual resolution.

Schneiderman asserts the settlement is unfair to many investors who will not be able to pursue repurchase claims for their losses.

The Federal Home Loan Banks of Boston, Chicago, Indianapolis, Pittsburgh, San Francisco, and Seattle claim they alone paid more than $8.8 billion for Countrywide Trusts - an amount greater than the proposed group settlement.

If the proposed $8.5 billion settlement is approved, the Federal Home Loan Banks will not be able to pursue loan repurchase claims for their losses.

""[M]any observers now estimate that Countrywide and Bank of America are liable to repurchase loans in amounts that are many times the amount of the proposed settlement,"" said the Federal Home Loan Banks in their filing with the New York Supreme Court.

The 15 investors filing suit in California state claims similar to AIG â€" that Countrywide hid loan status and lending practices, leading to losses among investors.

According to ""_Reuters,_"":http://www.reuters.com/article/2011/07/29/us-bankofamerica-countrywide-lawsuit-idUSTRE76S5QN20110729 a BofA spokesman commented, ""It is unfortunate that select investors chose to opt out of a fair and equitable agreement to settle these issues. We intend to vigorously defend these claims.""

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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