US Judge Decides to Keep $8.5 bn BofA Deal in Federal Court

October 20 00:00 2011

New York, October 20 (RainbowNewsLine.com) – The proposed $8.5 billion settlement deal regarding Bank of America Corp’s mortgage-backed securities has been assigned to a federal court by a judge on Wednesday. This decision will potentially drag the litigation and raise the stakes for Bank of America, which had hoped for an early resolution of the uncertainty over potential liabilities tied to pools of soured loans sold to investors by Countrywide Financial Corp, the mortgage lender it bought in 2008.

Analysts consider Bank of America’s purchase of Countrywide, which was the biggest US lender at the time of being taken over, as a disastrous move as it has cost the bank over $30 billion after taking into account lawsuits and write downs.

Bank of America will face uncertainties and higher payouts to the mortgage-backed securities investors if there is any delay in resolving the case. BofA will also have to improve its mortgage servicing practices as per terms of the proposed agreement but lawyers for some homeowners felt that the required servicing changes would not be corrective.

Some investors have also objected to the proposed settlement which was presented to a state judge in June for approval by Bank of New York Mellon Corp., the trustee for the mortgage securities. U.S. District Judge William Pauley in Manhattan on Wednesday issued a written ruling agreeing with one objector, institutional investor Walnut Place that the case belonged in federal court.

  Categories: