The New York Times reports that Bank of America’s (NYSE: BAC) recent $8.5 billion settlement with holders of mortgages backed securities may hit rough waters:
In court papers filed on Tuesday in New York State Supreme Court in Manhattan, 11 companies collectively calling themselves Walnut Place said the settlement was inadequate.
On Wednesday, Bank of America announced the settlement with 22 institutional investors, including BlackRock, MetLife, Pimco and the Federal Reserve Bank of New York.
The bank said that accord would be part of $20 billion of mortgage-related charges that it would take, hoping to resolve much of the liability from its $2.5 billion purchase of the mortgage lender Countrywide Financial in 2008.
Bank of New York Mellon is acting as trustee for 530 mortgage securitization trusts that would be covered by that settlement. It says it favors approval of the $8.5 billion settlement, calling it reasonable.
Here’s where the problems begin:
The settlement was also intended to cover Walnut Place’s claims. But the Walnut Place group said it had “serious concerns about the secret, non adversarial and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms.”
Walnut Place said it planned to ask Justice Barbara R. Kapnick, whose approval is required for the settlement, to excuse it from the accord or else to compel greater disclosures about the pact, on July 13. A hearing to consider approval of the $8.5 billion settlement is scheduled for Nov. 17.
This isn’t the first time Walnut Place has been unhappy with BAC:
In February, Walnut Place sued Bank of America, seeking to force it to buy back loans that underlay $1.06 billion of securities it owned, asserting misrepresentations by Countrywide.
It said these misrepresentations in part concerned whether underwriting guidelines had been followed, and the size of the loans relative to the underlying homes’ values.
Covestor models that hold Bank of America as of 7/5 include:
- Hedged by Robert Foo
- Flexible Value by Beckerman Institutional
- Top 5 Screener by Darren Taylor
- S&P 500 Best of Breed by Conrad Leifur
- Financial Services by Andy Schornack
- Discount to Intrinsic Value by Ginu Thomas
- Large Cap Value by Bristlecone Value Partners
- TenStocks by TenStocks
Sources:
“Group to Fight Bank of America Mortgage Claims Settlement” New York Times, 7/5. https://www.nytimes.com/2011/07/06/business/06bank.html
