Aug. 13 (Bloomberg) -- Bank of America Corp. won a restraining order barring Colonial Bank, the Alabama lender under federal criminal investigation, from selling or otherwise disposing of $1 billion in cash and loans held by Colonial.

Colonial, based in Orlando, Florida, said last week it may be placed into receivership with the Federal Deposit Insurance Corp., after a planned Aug. 10 meeting with the Alabama State Banking Board. Details of the meeting weren’t disclosed.

U.S. District Judge Adalberto Jordan in Miami issued the order after Bank of America sued Colonial yesterday in Miami, claiming Colonial is holding the cash and loans as a custodian for Ocala Funding Inc. The order notes that the suit relates to more than 6,000 mortgages worth more than $1 billion.

“To the extent that the interests of the public are implicated in this case, they weigh in favor of requiring Colonial to honor its contractual obligations and avoiding what would amount to a $1 billion heist,” the judge said in an order posted online today.

Ocala is a commercial-paper vehicle sponsored by Taylor, Bean & Whitaker Mortgage Corp., the 12th-largest U.S. home lender, which received funding from Colonial. The commercial paper, or short-term IOUs, was backed by residential mortgages.

Merrie Tolbert, a Colonial spokeswoman, couldn’t be reached immediately for comment.

Mortgages Bought

Freddie Mac, the government-supported mortgage company, bought some of the mortgages, according to the lawsuit. Charlotte, North Carolina-based Bank of America is acting as custodian for the vehicle, representing holders of Ocala debt.

Cash sent by Freddie Mac to Colonial, which was acting as an intermediary and required to pass the money to Ocala, wasn’t delivered, according to the lawsuit.

A planned $300 million injection into Colonial by an investor group led by Taylor Bean & Whitaker collapsed on July 1. Taylor Bean closed its lending business last week after being suspended by U.S. agencies and Freddie Mac.

The restraining order will expire unless the judge decides in an Aug. 28 hearing to extend it.

The case is Bank of America v. Colonial Bank, 09-CV-22384, U.S. District Court, Southern District of Florida (Miami).

To contact the reporters on this story: Laurence Viele Davidson in Atlanta at lviele@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net.

Last Updated: August 13, 2009 17:26 EDT