By Jonathan Stempel
NEW YORK, Nov 8 (Reuters) - Merrill Lynch, part of Bank of
America Corp, on Thursday lost its bid to dismiss a federal
regulator's lawsuit accusing it of misleading Fannie Mae and
Freddie Mac into buying billions of dollars of risky mortgage
U.S. District Judge Denise Cote in Manhattan said the
Federal Housing Finance Agency, which had sued over roughly
$24.9 billion of securities, may pursue fraud claims over
Merrill's representations in offering materials regarding
mortgage underwriting standards.
The judge also allowed claims under Washington, D.C.
securities law, as well as claims for punitive damages and to
rescind suspect mortgage transactions. She dismissed some fraud
Bank of America spokesman Lawrence Grayson declined to
Fannie Mae and Freddie Mac were seized by federal regulators
on Sept. 7, 2008, and the FHFA became their conservator.
Last year, that agency filed 18 lawsuits over mortgage
losses suffered by Fannie Mae and Freddie Mac on roughly $200
billion of securities, including $57.5 billion sponsored or
underwritten by Bank of America and its Merrill and Countrywide
A trial is scheduled for June 2, 2014.
Cote had previously refused to dismiss FHFA lawsuits against
two other banks over Fannie Mae and Freddie Mac mortgage losses.
On Nov. 5, she rejected JPMorgan Chase & Co's bid to
dismiss a case over $33 billion of securities.
In May, she refused to end a case against Switzerland's UBS
AG over $6.4 billion of securities.
Since buying Countrywide in July 2008 and Merrill six months
later, Bank of America has lost nearly $40 billion on mortgage
litigation and investor demands to buy back soured loans, Credit
Suisse said on Oct. 5.
On Oct. 24, the U.S. Department of Justice filed its own
civil fraud lawsuit accusing the Charlotte, North Carolina-based
lender of causing more than $1 billion of taxpayer losses by
selling toxic mortgage loans to Fannie Mae and Freddie Mac.
Bank of America said at the time that it had "stepped up and
acted responsibly to resolve legacy mortgage matters."
The case is Federal Housing Finance Agency v. Merrill Lynch
& Co et al, U.S. District Court, Southern District of New York,
(Additional reporting by Nate Raymond)
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