Aug. 26 (Bloomberg) -- An investor group challenging Bank of America Corp.’s proposed $8.5 billion mortgage-bond settlement seek to move the case to federal court from state court.
Walnut Place LLC and related entities that would be bound by the proposed deal filed a notice of removal of the case to U.S. District Court in Manhattan. The case was first filed in state court, where a judge is scheduled to consider approving the agreement in November.
A change in venue that extends how long the case takes may mean a longer period of concern among Bank of America shareholders about whether the settlement’s costs will increase. It may also give bondholders seeking a large payout more time to organize their efforts and strengthen their objections, according to Bill Frey, head of investment and brokerage firm Greenwich Financial Services LLC in Greenwich, Connecticut, who advises mortgage-securities investors.
“This deal is like a fish: the more you look at it the more it stinks,” Frey said.
Under the proposed settlement, Bank of America would pay $8.5 billion to resolve claims from investors in Countrywide Financial mortgage bonds. It was negotiated with a group of institutional investors and would apply to investors outside that group.
Bank of New York Mellon Corp., the trustee for the mortgage-securitization trusts covered by the settlement, will seek to move the case back to state court, Kevin Heine, a bank spokesman said.
The effort by Walnut Place to move the case to federal court “is unsupported by the law and will only serve to delay the resolution of the proceeding,” Heine said.
“This tactical maneuvering at the deadline for objections has no impact on the underlying merits of the agreement,” Bank of America spokesman Lawrence Grayson said in an e-mailed statement.
David Grais, a lawyer for Walnut Place, couldn’t immediately be reached for comment.
The case is In the matter of the application of The Bank of New York Mellon, 651786/2011, New York state Supreme Court, New York County (Manhattan).
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