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1st July 2011

BoA $8.5bn mortgage settlement offer NOT a done deal

The widely reported Bank of America settlement offer made to buyers of Retail Mortgage backed Securities that are claimed not to have been as described in the prospectus is not a done deal and could be rejected. The securities were mainly issued by Countrywide Financial, acquired by Bank of America in mid 2008.


The deal is offering just 2 cents in the dollar, a level which outrages some. It does represent over three quarters of what the Trustee calculated as justified and should the bondholders continue to fight any settlement income is likely to be significantly delayed and is by no means certain at all. Fighting on would also significantly increase the legal costs involved.


Bank of New York Mellon, the debt's trustee believes the deal is acceptable and will be recommending it to the New York court. Allstate are one of the larger bondholders involved and are still talking tough about "all rights and remedies", however have not outright rejected the proposal.