U.S., Goldman Sachs Seek Details on BofA Mortgage-Bond Deal
Goldman Sachs Group Inc. (GS), federal regulators and investors are seeking more information about Bank of America Corp.’s effort to resolve mortgage liabilities with an $8.5 billion settlement.
The Federal Deposit Insurance Corp., the Federal Housing Finance Agency, Goldman Sachs and pension funds are among those who have objected to the agreement, saying they don’t have sufficient information to evaluate the deal.
Goldman Sachs can’t determine whether “all investors who are similarly situated will be treated equally” under the settlement, the company said in a court filing late yesterday in federal court in Manhattan. A group of homeowners separately sued Bank of America in federal court, seeking to block the accord, claiming terms related to the servicing of mortgage loans will accelerate home foreclosures.
The objections create more obstacles for Charlotte, North Carolina-based Bank of America as it seeks court approval for the settlement to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. It acquired Countrywide in 2008.
The deal was negotiated with a group of institutional investors, including BlackRock Inc. and Pacific Investment Management Co., and would apply to investors outside that group.
Bank of New York Mellon Corp. (BK), the trustee for the mortgage-securitization trusts covered by the agreement, asked a New York state judge to approve the settlement. A hearing on the matter was initially scheduled for November. New York Attorney General Eric Schneiderman asked the judge to reject the accord and said in court papers that he has potential claims against Bank of America. An investor group is seeking to move the case to federal court.
“We believe that the trustee acted reasonably in entering into the settlement, and that there are compelling reasons why the agreement should receive judicial approval.” Lawrence Grayson, a spokesman for Bank of America, said in an e-mail. He declined to comment on the homeowner lawsuit. BNY Mellon spokesman Kevin Heine declined to comment on the objections.
The agreement, which must be approved by a judge, is important for Bank of America to put its mortgage liabilities behind it, Paul Miller, an analyst at FBR Capital Markets, said in an interview.
“I think there’s a possibility it gets thrown out,” he said. “But I don’t know to handicap that.”
Those filing objections include American International Group Inc. (AIG), the Federal Home Loan Banks of Boston, Chicago and San Francisco, the Maine State Retirement System, and the National Credit Union Administration, a federal agency that is the liquidating agent for five corporate credit unions.
“Investors are unable to evaluate the fairness of the allocation of the settlement proceeds,” the Maine retirement system said.
The FDIC, the receiver for failed banks, said it owns securities covered by the settlement. Andrew Gray, an FDIC spokesman, said in an e-mail that the filing is a notice to preserve its right to make claims as a part of the settlement and seeks additional information.
“It is not an evaluation or opinion on the settlement itself,” he said.
The FHFA, which regulates mortgage finance companies Fannie Mae and Freddie Mac, said in a statement that it was also seeking more information and “is aware of no basis upon which it would raise a substantive objection to the proposed settlement at this time.”
Yesterday, Nevada asked a federal judge in Reno to terminate an earlier settlement with Bank of America which involved home-loan modifications tied to its Countrywide unit, saying the company hasn’t complied with terms of the accord.
Bank of America increased consumer interest rates and monthly payments in violation of a consent decree and required homeowners to provide extensive documentation to qualify for modifications even though the settlement calls for a “streamlined” approach, the state said yesterday in a statement.
The state is seeking to file an amended complaint against the bank with additional claims.
“After two and a half years of lost implementation -- of borrowers denied modifications, discouraged by repeated and futile efforts to obtain help, or already subject to foreclosure -- the state no longer can get the benefit of its original settlement with defendants,” Nevada Attorney General Catherine Cortez Masto said yesterday.
The case is Bank of New York Mellon v. Walnut Place LLC, 11-cv-5988, U.S. District Court, Southern District of New York (Manhattan). The homeowner lawsuit is Iesu v. Bank of New York Mellon, 11-6078, U.S. District Court, Southern District of New York (Manhattan). The Nevada case is State of Nevada v. Bank of America Corp. (BAC), 11-cv-00135, U.S. District Court, District of Nevada (Reno).
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