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Bank of America Corporation (BAC - Analyst Report) legal problems related to the sale of mortgage backed securities (MBS) seems never ending. Now, the New York Attorney General (AG) is investigating the bank’s involvement in a number of transactions regarding underwriting and issuance of MBS. The company reported this in its latest 10-K filing with the Securities and Exchange Commission (SEC).

Over the last few years, BofA has been striving hard to put its MBS-related problems at bay. The majority of losses stem from MBS issued by Countrywide Financial Co., acquired in 2008. The company has resolved several litigations related to MBS, while there are many still pending.

The current investigations being faced by BofA are a part of the larger probe being conducted under the aegis of the Residential Mortgage Backed Securities (RMBS) Working Group. The Group was formed by President Obama in Jan 2012 to investigate and impeach the alleged misconducts that led to the financial crisis. The group consists of officials from the U.S. Justice Department, the SEC, the FBI and other federal and state officials.

BofA is the third company being targeted by the New York AG over the role of banks in repackaging and selling MBS. In 2012, the AG had filed lawsuits against JPMorgan Chase & Co. (JPM - Analyst Report) and Credit Suisse Group (CS - Snapshot Report) for defrauding a large number of mortgage bond investors by misrepresenting the quality of loans underlying MBS.

The measures being undertaken by the regulatory and legal authorities to come down hard on such unwarranted activities of these institutions, including The Goldman Sachs Group Inc. (GS - Analyst Report) and Citigroup Inc., will deliver huge relief to the investors.

BofA is passing through a rough patch with all the litigation overhangs. Yet, on the brighter side, the ill-effects of these are likely to be eliminated by the strong fundamentals of the company.

BofA currently retains a Zacks Rank #3 (Hold).

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