(Reuters) - U.S. insurance giant American International Group (AIG.N) is planning to sue Bank of America (BAC.N) to recover more than $10 billion in losses on $28 billion of investment in mortgage-backed securities, the New York Times said citing three people with knowledge of the complaint.
AIG’s move adds to the surge of investors seeking compensation for the troubled mortgages that led to the financial crisis, the Times said.
The complaint claims that Bank of America along with its units Merrill Lynch and Countrywide Financial misrepresented the quality of the mortgages placed in securities and sold to investors, the newspaper reported.
Bank of America is likely to dispute AIG’s claims in the suit, which is expected to be filed on Monday in New York State Supreme Court, the paper said.
Bank of America spokesman Lawrence Di Rita told NY Times that the mortgage securities disclosures were robust enough for sophisticated investors. He said many of the loans lost value because housing fell.
“Now you have a lot of investors and lawyers who are seeking to recoup the losses from an economic downturn,” Di Rita told the paper. The bank has not yet seen AIG’s suit, NY Times said.
An AIG spokesman declined to comment to the paper. Bank of America and AIG could not immediately be reached for comment by Reuters.
Reporting by Sakthi Prasad in Bangalore; Editing by Hans-Juergen Peters