Bank of America Corp. paid $111.4 million to mortgage-bond trusts after cutting the balances on home loans more than allowed under the terms of an $8.5 billion settlement, according to a trustee notice to investors.
The lender completed 10,786 loan modifications “using valuation tools different from those prescribed” by the accord, according to the April 25 notice from Bank of New York Mellon Corp., the trustee. Bank of America reached the 2011 deal with a bondholder group including BlackRock Inc. and Pacific Investment Management Co.
The agreement, which is pending a court appeal by other investors, settled claims that Bank of America’s Countrywide unit mishandled servicing and failed to repurchase mortgages that never matched their promised quality. The deal offered cash payments and a shift in protocols for managing troubled mortgages, including by moving them to specialist firms and establishing more specific guidelines.
Under the accord, loan balances after modifications shouldn’t fall below the value of the properties, as measured by comparable-home sales excluding distressed transactions, Nomura Securities International analysts Paul Nikodem, Pratik K. Gupta and Rohit Sinha wrote yesterday in a report.
With the payments made by Bank of America to fix the error, a “large number” of Countrywide mortgage-bond deals recouped some of what had been written down, the analysts said.
“The issue has been resolved to the trustee’s satisfaction,” said Rick Simon, a spokesman for Charlotte, North Carolina-based Bank of America. He declined to comment further. Kevin Heine, a spokesman for Bank of New York, declined to immediately comment, while Kathy Patrick, the bondholder lawyer at Gibbs & Bruns LLP who helped create the settlement, didn’t immediately respond to e-mails seeking comment.
Bank of America yesterday fell the most since November 2012 after suspending plans for a dividend increase and $4 billion of share repurchases because of an error in its stress-test submission to the Federal Reserve.