As Colonial BancGroup struggles to survive, Bank of America Corp. filed a lawsuit in order to protect its claim on Colonial loans in case it ends up declaring bankruptcy.
In the lawsuit filed with the U.S. District Court of the Southern District of Florida, Bank of America asserted that over $1 billion in loans Colonial got from Freddie Mac were funded with their aid.
The basis of the lawsuit is by Bank of America is the connection between the mortgage business of Colonial and Taylor, Bean & Whitaker, which shuttered most of its operations recently. A unit of Taylor Bean – Ocala Funding LLC – holds a number of home mortgages which they sell to Freddie Mac. Bank of America is the custodian, indenture trustee and collateral agent of Ocala.
Officials at Bank of America say they’re simply doing their job as trustee in the circumstances.
But also included in the lawsuit are claims of unjust enrichment, breach of contract and civil theft, not only against Colonial, but also against 10 unnamed individuals, who at this time are identified as a group named John Doe.
Colonial BancGroup has grown from a small regional bank over the last ten years to one of the largest funders of real estate loans that have originated at other financial institutions and banks.
The company, which is under investigation by the Department of Justice, operating under a cease-and-desist order from regulators, and running out of capital, is just a step away from being taken into receivership by the Federal Deposit Insurance Corp. (FDIC).
Update (8/14/2009): Colonial BancGroup May Be Taken Over by BB&T
