Investors In Countrywide MBS Cry Foul In Bank Of America $8.4B Loan Modification Settlement With State AGs
The Wall Street Journal reports:
- Bank of America Corp.'s decision to embark on an
$8.4 billionhome-loan-modification program to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement's costs: investors who hold securities backed by Countrywide mortgages.
- Bank of America didn't seek investor approval before agreeing to the settlement "because the design of the program was based in large part on the delegated authority" in the contracts, [a Bank of America spokesman said].
- But some investors believe they should have been contacted first. [...] Other investors said Bank of America is moving much of the cost of the settlement to investors when it should be paying those costs itself. [... T]hey said that many of these loans violated representations and warranties made when the mortgages were packaged into securities. As a result, they said, Bank of America should repurchase the loans before modifying them.
- "This is literally an attempt to settle a dispute with state attorneys general on predatory lending claims with someone else's money," said one money manager. "In 10-plus years in the market, I've never seen anything as outrageous as this."
For more, see Investors Hit BofA Loan Modifications.
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