Bank of America's $8.5B settlement lingers


Just when you thought that the mortgage meltdown was in the rear view mirror at Bank of America, an esteemed New York Times columnist notes some big, complicating issues.

The columnist notes new evidence filed by three Federal Home Loan Banks in Boston, Chicago and Indianapolis, and Triaxx, an investment vehicle that bought mortgage securities over the controversial $8.5 billion settlement that Bank of America inked in 2011 to resolve claims over Countrywide's misdeeds.

The evidence would suggest that "questionable practices by the bank's loan servicing unit have continued well after the Countrywide acquisition; they paint a picture of a bank that continued to put its own interests ahead of investors as it modified troubled mortgages…Among the new details in the filing are those showing that Bank of America failed to buy back troubled mortgages in full once it had lowered the payments and principal on the loans — an apparent violation of its agreements with investors who bought the securities that held the mortgages." 

In addition, the bank "may have engaged in self-dealing and other misconduct, including in connection with modifications to first lien loans held by the Trusts where BofA or Countrywide held second lien loans on the same subject properties," according to the documents.

The problem is that Bank of America held lots of second liens in addition to first liens. By modifying the first lien, does it increase the chances that second liens will continue to perform?

The big issue here is whether these revelations make it less likely that the $8.5 billion settlement will be approved. The critics of the deal are certainly making the process difficult.

For more:
- here's the article

Related articles:
Bank of America inks settlement with Fannie Mae
Bank of America hits snags on road to settlement