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BofA's proposed settlement with mortgage investors comes under fire

Objections mount to Bank of America's proposed $8.5-billion settlement with 22 major holders of Countrywide Financial mortgage securities.

August 31, 2011|By E. Scott Reckard, Los Angeles Times

Bank of America Corp.'s proposed $8.5-billion settlement with 22 major holders of Countrywide Financial Corp. mortgage securities came under fire in New York federal court as a deadline to challenge the deal arrived.

The flurry of objections Monday and Tuesday included a lawsuit by homeowners whose loans had been pooled to back the mortgage bonds.

Filings objecting to the deal also were lodged by the Federal Deposit Insurance Corp., which represents failed banks that lost money on the securities, and the Federal Housing Finance Agency, which regulates the government-controlled mortgage giants Freddie Mac and Fannie Mae.

The FDIC and the FHFA described their objections as place holders. They said they needed more time to fully understand the deal that Bank of America struck with the holders of bonds from Countrywide, the Calabasas mortgage goliath that was near bankruptcy from soured loans when BofA acquired it in 2008.

The settlement is the centerpiece of Bank of America Chief Executive Brian T. Moynihan's efforts to deal with lawsuits accusing Countrywide of deceiving bondholders about the recklessness with which it had funded subprime and other high-risk home loans.

Another defendant hoping to settle the litigation is the Bank of New York Mellon, which was the trustee for 530 pools containing thousands of Countrywide mortgages that had been bundled to back mortgage securities.

Separately, a group of aggrieved homeowners whose loans are among those backing the securities challenged the settlement. They filed a lawsuit seeking class-action status on behalf of themselves and other borrowers they contended had been severely damaged by botched loan servicing.

A Bank of America spokesman declined to comment on the litigation.

scott.reckard@latimes.com

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