Aug. 30 (Bloomberg) -- Investors and federal regulators are demanding 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, pension funds and other investors filed objections to the agreement demanding more information to evaluate the deal. Today was the deadline for objections under a court order.
A group of homeowners separately sued Bank of America in federal court, seeking to block the settlement, saying terms related to the servicing of mortgage loans will accelerate home foreclosures.
The objections create more obstacles for 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 settlement 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., the trustee for the mortgage-securitization trusts covered by the agreement, has asked a New York state judge to approve the settlement in November. New York Attorney General Eric Schneiderman has asked the judge to reject the deal and said in court papers that he has potential claims against Bank of America. An investor group, meanwhile, is seeking to move the case to federal court.
Trustee Acted Reasonably
“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 Bank of America spokesman, 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 depends on a judge’s approval, 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., 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.
‘Unable to Evaulate’
“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.”
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).
--Editors: Fred Strasser, Charles Carter
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