US stocks suffered their biggest loss in two months on Tuesday afternoon on the back of fears that banks may be forced to repurchase billions of dollars worth of mortgages that should never have been issued.
Bank of America, and possibly other banks including giant Citibank, are worried that thousands of mortgage deals they bundled up and sold on to the securitisation markets as bonds were mishandled and should never have been issued.
A group of investors launched a lawsuit against Bank of America yesterday, although this could take years to settle.
Yesterday’s high volumes of stock selling mirrored a pattern seen last week when fears regarding mishandled mortgages first came to light.
